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Ruling

Subject: Self-education and other work related expenses

Question 1

Are you entitled to a deduction for self-education expenses for the course fees, tuition fees, books, clothing and police checks related to your studies?

Answer

No

Question 2

Are you entitled to a deduction for work related clothing?

Answer

No

Question 3

Are you entitled to a deduction for police checks required for your employment?

Answer

Yes, with the exception of the initial check as described below.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2009

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You have a Certificate III in Aged Care.

In 20XX you began studying for a Certificate IV in Nursing.

You were working part-time as a carer at an aged care facility.

You currently work part-time as a carer through an agency providing respite/aged care.

You are required to wear black or navy pants and a white shirt for your current employment.

Your duties include;

· Assisting patients with daily tasks in their home environment

· Providing patients with medication from their registered packs

· Feeding patients if required

· Ensuring the patients are comfortable.

You state your course will help you carry out your duties as a carer.

On completion of your course you will be able to be registered as an Enrolled Nurse.

While undertaking clinical training for the course you are also required to wear black or navy pants and a white shirt.

You have incurred costs for tutoring in relation to your course.

Regular police checks are required as a part of gaining your certificate IV in nursing and are also a requirement of your employment.

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.

Self-education expenses

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (FCT v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

However, paragraph 12 of TR 98/9 states that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field or employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Several court cases have established general guidelines in determining the deductibility of self education claims. The decision in FCT v. Maddalena (1971) 2 ATR 541; (1971) 45 ALJR 426; 71 ATC 4161, supports our view that no deduction is allowable for self education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses would come at a point too soon to be properly regarded as incurred in gaining assessable income.

In your case, you are employed as a carer. The duties you are required to carry out in your role are general in nature relative to the subsequent specialised study or training that you have undertaken.

It may be argued that you will utilise this more specialised knowledge generally in your current role as a carer. However, when viewed objectively, this course is designed to enable you to obtain employment in a new role rather than assist you in performing your duties as a carer. Therefore, you are unable to claim self education expenses under section 8-1 of the ITAA 1997 because the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Work related clothing

Taxation Ruling TR 97/12 deals with the circumstances where work related clothing or uniform expenses are allowable as deductions under section 8-1 of the ITAA 1997.

Conventional clothing is everyday clothing that can reasonably be worn irrespective of whether the wearer is working. TR 97/12 explains that the cost of conventional clothing is usually not considered to be an allowable deduction as there is insufficient connection between the expenditure and the income earning activities of the taxpayer.

The expense is normally characterised as private as it satisfies a taxpayer's need for modesty, decency and warmth. However, expenditure may be deductible where the clothing is occupation specific, part of a compulsory and distinctive uniform/wardrobe or is worn to protect you from injury or protect your everyday clothing from damage (like a laboratory coat).

TR 97/12 also states that the fact that an employer may expect or require an employee to dress in a certain manner or the fact that a taxpayer may perceive that it is important to his/her success in his/her occupation to wear a particular type or style of conventional clothing does not make the cost of that clothing deductible (paragraph 21 and 22).

Case U95 87 ATC 575 provided other relevant factors that should be considered:

· Express or implied requirements of the employer or business concerning clothing

· The extent to which the clothing is distinctive or unique to the nature of the employment or business having regard to particular, special or accepted work clothing requirements, including its availability to be worn by members of the general public

· The extent to which the clothing is used solely for work

· The extent to which the clothing is unsuitable for any activity other than work.

In your case there is not a sufficient connection between the clothing expenditure and your income earning activities. The clothing is not distinctive and unique to the nature of your employment. Furthermore, there is nothing to specifically preclude this type of clothing being worn for activities other than work or by other members of the general public. Accordingly, the expenses are private in nature and therefore not deductible under section 8-1 of the ITAA 1997.

Police Checks

For expenditure to be deductible, the expenditure must have the essential character of an outgoing incurred in gaining assessable income. It is not sufficient that the expenditure is a prerequisite to the derivation of assessable income; it must contribute to the derivation of that income. Expenditure that is a prerequisite to obtaining employment is not deductible as it is incurred at a point too soon to be regarded as being incurred in gaining assessable income.

Generally police checks are not an allowable deduction where they are a requirement for employment into an industry as the expense is an outgoing that precedes the earning of assessable income. It is not an expense incurred in the course of gaining assessable income (Paragraphs 178-179 of Taxation Ruling TR 98/6).

However paragraph 54 of Taxation ruling TR 95/15 provides that the renewal of an annual practicing certificate is allowed as a deduction.

This can be applied to your circumstances such that you are required to obtain regular police clearance certificates (or police checks) to be able to continue to act in the capacity of a carer. Accordingly you are entitled to a deduction under section 8-1 of the ITAA 1997 for the regular police checks, apart from the initial check which was a prerequisite to entry into this employment.