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Authorisation Number: 1011942086345

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Ruling

Subject: Deduction - membership fees

Question

Is the amount you incurred for membership fees and a pro indicator set in order to become an FX trader a deductible expense?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You incurred $XXX for a membership fee which was paid on XX XX XX.

You also paid $XXX for an indicator set.

You were aware that you would not be trading live for some time as there was a lot of material to cover in the training room.

However, you wanted to take advantage of not having to pay $XX each month which was applicable after X September 20XX.

You have not traded live in the year ended 30 June 2011. You do not have any trading income or losses for this year.

You will be trading live in the 2012 financial year and onwards.

The upfront payment of $XXX means that you will not be claiming $XXX ($XX each month) for access to the trading room.

You will need the indicator set when trading in the live environment in 2012 and onwards.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

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.

Taxation Determination TD 2004/1 considers the deductibility of the costs of subscriptions to share market information services and investment journals. Paragraph 10 of TD 2004/1 details that where the share market information service is used to set up an investment portfolio or commence share trading activities the expenditure is incidental and relevant to outlaying the price of acquiring the investment. Consequently, the expenditure is incurred at a point too soon to be regarded as incurred in gaining or producing assessable income and no deduction is allowed.

In your case, the cost of the membership fees and indicator set were incurred before any assessable income was being earned. You incurred the expense for these items in the year ended 30 June 2011 with the view to begin trading in the subsequent financial year. The expenses have been incurred at a point too soon to be regarded as incurred in the course of earning assessable income. Therefore, a deduction is not allowable under section 8-1 of the ITAA 1997 for the membership fees and indicator set.