Edited version of private advice

Authorisation Number: 1051802856832

Date of advice: 09 February 2021

Ruling

Subject: Business deduction - employee training fees

Question

Is the payment of the Practical Legal Training course fee for an employee an allowable deduction for the employer?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your company provides management and consulting services to a specific industry.

You paid the fee for a Practical Legal Training course for your employee direct to the educational facility.

The employee was not reimbursed for any of the fee.

The training has a direct connection to the work currently undertaken by the employee.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent that;

(a)  It is incurred in gaining or producing your assessible income; or

(b)  It is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessible income.

Except where the outgoings are of a capital, private or domestic nature or relate to the earnings of exempt income, or a provision of the ITAA prevents it.

In many cases the legitimate ends of a business will encompass what is in the personal interest of the director and employees. The decision in Magna Alloys & Research Pty Ltd v FCT 80 ATC 4542; (1980) 11 ATR 276 (Magna Alloys) shows the fact that the dominant motive in incurring an expense is to provide a benefit to the directors does not in itself, prevent the outgoing form being necessarily incurred in carrying on the taxpayers business. Expenditure incurred by a business on behalf of an employee such as training of employees in relevant areas is generally an allowable deduction.

In this case you, the employer, paid the employees fees to attend a Practical Legal Training course with the object of the employee being admitted as a solicitor after successful completion of the course. Although the employee will receive a personal benefit from the expenditure, the business stands to benefit by having direct access to a solicitor, providing timelier service to existing and new clients and allowing the business to successfully operate in an enhanced manner. That is, the company is paying for the training of an employee to derive increased income by the company with less fees being paid for intermediaries in contractual arrangements.

It is considered that there is a necessary connection between the expenditure and the assessible income of the company. As a result, it can be concluded that the outgoing is necessarily incurred in carrying on of a business and, therefore is deductible under Section 8-1 of the ITAA 1997.

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