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Ruling
Subject: Examination fees
Question
Are you entitled to a deduction for examination fees and English test?
Answer
No
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You are a graduate from overseas.
To become eligible to work in Australia in your profession, you are required to pass the relevant examinations and nominated English test.
You have incurred expenses in relation to these tests.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, except where the outgoings are of a capital, private or domestic nature.
While the following cases involve solicitors, the principles are applicable in your situation.
In Case J30 77 ATC 282; 21 CTBR (NS) Case 52, a law clerk claimed a deduction for admission fees to practise as a solicitor. After admission he continued in the same employment performing the same duties on increased salary. It was considered that the expense was not incurred in doing work as a law clerk but in obtaining work as a solicitor and this would be so notwithstanding that it was with the same employer. The claim was disallowed.
The applicant in Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549 claimed a deduction for expenses that led to her admission as a solicitor. The Tribunal held the admission fees were of a capital nature and were, therefore, not an allowable deduction. The admission expenses secured the applicant a 'lasting advantage'.
In your case, the cost of the relevant examinations and the English test were not incurred in doing work in your profession. Rather, the successful completion of the exam will open up a new area of employment. Such expenses provide you with a lasting benefit and are considered to be capital in nature. A deduction is therefore not allowable under section 8-1 of the ITAA 1997.