Edited version of private ruling

Authorisation Number: 1011722569618

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Ruling

Subject: Self education expenses

Question

Are you entitled to claim costs to attend various concerts, art galleries, theatre performances and movies as work related self education expenses?

Answer: No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ending 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You attend concerts, art galleries, theatre performances and movies as part of your compulsory professional development to assist in your teaching role.

The education department accepts the attendance to these events as hours towards your professional development.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

It is considered that attending these events is a private or recreational activity and is too general in nature for the expenses to be incurred in the course of gaining your assessable income; as such no deduction is allowed.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

There must be sufficient connection between the outgoing and the activities directed at gaining or producing assessable income. The decision in Ronpibon Tin v. FCT (1949) 78 CLR 47; (1949) 8 ATD 431, confirms that for an outgoing to be deductible under section 8-1of the ITAA 1997, a taxpayer has to establish that there is a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income.

In the majority of situations, taxpayer expenditure upon concert and other entertainment events would be considered 'private or domestic' as it is usually undertaken for the purpose of personal enjoyment. Even though some taxpayers may be able to use part of the information in the course of their work, the benefit gained is usually remote and the proportion of the expense that relates directly to their work is incidental to the private expenditure.

The Commissioner provided guidance on this type of expenditure with respect to employee performing artists in Taxation Ruling TR 95/20 which states that a deduction is allowable for the costs of attendance at theatre or film performances, if the performances have a content specifically related to the employee performing artists' current work. Costs associated with the attendance at performances for general interest or entertainment or other private purposes are not an allowable deduction.

TR 95/20 provides the following examples.

Example: Ellen is a member of a professional ballet company. She attends a performance of Swan Lake by the Bolshoi Ballet Company that is on tour in Australia. The style and standard of performance of a world famous ballet company has a direct nexus to Ellen's own income-earning activities as a ballet dancer and the cost of attending the performance is allowable.

Example: Bruce is an actor. He regularly attends films and stage plays out of general interest and for entertainment. The connection between Bruce's attendance at these productions and his income-earning activities as an actor is too remote for a deduction to be allowable.

The difference between the two examples is that Ellen's expenditure specifically enhances her abilities and skills as a ballet dancer, whilst Bruce is attending out of general interest and there is not sufficient nexus between his attendance and the enhancement of his skills as an actor.

Taxation Ruling TR 98/9 sets out the Commissioner's views in respect of self education expenses. It states that self education expenses are deductible under section 8-1 of the ITAA 1997 if they have a relevant connection to the taxpayer's current income earning activities. TR 98/9 also states that the self education expenses are allowable as a deduction if:

· They have a relevant connection to the taxpayer's current income earning activities.

· The income earning activities are based on the exercise of a skill or some specific knowledge and the subject of self education enables the taxpayer to maintain or improve that skill or knowledge.

· The study of a subject of self education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income-earning activities in the future.

However, a deduction is not allowable for self-education expenses if:

· The study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity.

· The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

· The subject of the self education is too general in terms of the taxpayers income earning activities, as the necessary connection between the self education expense and the income activity do not exist.

The essential character of the expenditure incurred by the taxpayer is to be determined by an objective analysis of all the surrounding circumstances. The deductibility of attending all of these events needs to be considered under general self education principles and relevant case law.

In Case U109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return.

The Administrative Appeals Tribunal (AAT) examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that the general principle in these cases was that, the fact that the taxpayer may have been a better teacher after the travel; it was not enough to demonstrate a sufficient connection between the travel and their income earning activities. The AAT stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible.

In AAT Case U54 87 ATC 354, a senior lecturer travelled overseas on a tour organised by the Australia-China Society. The taxpayer argued that the trip would allow him to get up-to-date and adequate information in his field of academic interest, which would in turn increase his chance of advancement and help him to avoid the possibility of retrenchment. The Administrative Appeals Tribunal found that the trip was seen to be essentially private and recreational in nature and no deduction was allowed for the cost of his overseas trip.

Although in your case you didn't travel overseas these cases are relevant to your situation of work related self education expenses.

Attending concerts, art galleries, theatre performances and movies may arguably make you a better teacher, but the knowledge or skills that you will gain from them will be too general in nature for the expenses to be incurred in the course of gaining your assessable income.

In summary, the cost of entrance, travel and accommodation to attend all of these events is essentially of a private or recreational nature and as such no deduction is allowable.