Edited version of your private ruling

Authorisation Number: 1012145463583

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Real estate investment seminars

Question 1

Are you entitled to a deduction for the cost of real estate investment seminars?

Answer

No.

Question 2

Are you entitled to a deduction for the annual fee charged for ongoing monthly seminars?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You attended a series of real estate investment seminars.

The seminars covered investment in rental properties and provides a comprehensive property acquisition for investment and wealth service.

The course was undertaken as a seminar with continued seminars for the remainder of the year.

The seminars topics included:

· finding property hotspots and high capital growth areas

· provision of a personal wealth coach who offers guidance and mentoring through the entire process of creating wealth through property

· teaching of record keeping and taxation strategies

· assisting to build a successful team of advisers such as real estate agents, accountants and financiers

· advice in keeping costs and finances in order during the property acquisition process

· property education, strategy and research reports

· tools, software and systems to use

· ongoing events, seminars and retreats to attend.

The ongoing mentoring involves meeting with an appointed coach where you would discuss property investment opportunities and ways to achieve the purchase of these. You would also examine your current financial status, including assets and liabilities, and determine levels of affordability for your position.

The education seminars topics included:

· introduction to property wealth

· area showcases

· record keeping workshops

You attended these seminars with a view to continued purchasing of investment properties.

You purchased land less than 5 years ago with the intention of building a rental property. The construction of the rental property was completed and tenanted less than 5 years ago.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for the seminars and mentoring you attend as they are considered to be too general to be sufficiently relevant to the income earned from your current rental property and incurred at a point too soon to be relevant to any future property investment.

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 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 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.

If 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 their current income earning activities in the future, a deduction is allowable.

However, no deduction is 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 (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of 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.

A person who simply owns one or several investment properties is usually regarded as an investor who is not carrying on a rental property business. This is because of the limited scope of the investment property activities and the limited degree to which owners actively participate in investment property activities.

Currently, you derive rental income as owner of an investment property. As an investor, you are considered to derive passive income from your investment property. The income you derive is not based on the exercise of a skill or some specific knowledge in relation to rental properties.

Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which you directly gain or produce your assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of your particular case.

In your case, you attended a course which provides a comprehensive property acquisition for investment and wealth service. You also incur expenses to receive ongoing mentoring where you meet with your wealth coach and discuss property investment opportunities and ways to achieve the purchase of the properties as well as examining your financial status to determine the level of affordability for your position. You also attend seminars which cover topics such as introduction to property wealth, property showcases and record keeping workshops.

While we acknowledge that the seminars and mentoring may assist you with your current rental property, the course is considered to predominantly be geared to assist you in acquiring future investment properties and establishing an improved long term investment strategy. Subsequently, the whole of the cost of course is considered to be a capital outlay. It is incurred at a point too soon to be incidental and relevant in gaining or producing assessable income from future property investments. Also, the content of the course is considered too general to be sufficiently relevant to the earning of income from your existing property. Therefore a deduction is not allowable under section 8-1 of the ITAA 1997.