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Ruling
Subject: Work related expenses - costs of preparing job application
Question
Are you entitled to a deduction for the costs incurred in preparing your job application?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You were employed as a manager within a department.
In February 2011 you applied for a job as an Assistant Director within the same department.
You engaged the services of a professional, who assisted you with the preparation of your application for the position for a fee.
You were successful in gaining the position of Assistant Director.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
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 93/175 provides that expenditure incurred by an employee in applying for a promotion is deductible if the expenditure will objectively lead to, or will be likely to lead to, an increase in the employee's assessable income without effecting a change in the employee's current income-earning activities.
However, paragraph 2 of TD 93/175 states that if the expenditure is incurred in applying for a promotion which will involve a change in the employee's current income-earning activities, it will not be a deduction. This proposition is supported by the decision in Case Z1 92 ATC 101; 22 ATR 3549 and FC of T v. Maddalena 71 ATC 4161; 2 ATR 541. Similarly, if the promotion will result in the opening up of a new income earning activity for the employee, the expenditure will not be deductible.
In your case you have applied for a promotion within the same department. Although you have moved to a new section within the department we consider that your income-earning activities have remained the same. The expenses you incurred in relation to applying for the promotion are therefore deductible under section 8-1 of the ITAA 1997.