Edited version of your private ruling

Authorisation Number: 1012597468836

Ruling

Subject: Real estate workshop

Question 1

Are you entitled to a deduction for the expenses incurred to attend a real estate seminar?

Answer

No.

Question 2

Are you entitled to a deduction for the expenses incurred to become a member of a real estate education group?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You attended a real estate seminar

You incurred expenses to become a fully paid member of a real estate education group.

You currently own rental properties.

Topics covered include:

· Why are we here?

· Having the right mindset.

· Setting Investment goals.

· What is it going to take - the power of having a mentor to help you.

· Building a Real Estate Portfolio.

· Continuing Real Estate Education builds confidence and destroys fear.

· Types of income achievable from investing.

· The ingredients for success and ways to make money in real estate.

The membership package includes:

· Mentor access

· Continuing real estate education

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 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 deductibility of self-education expenses. A deduction is allowable 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.

Similarly, 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 his or her current income earning activities in the future, a deduction is allowable. 

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). 

Similarly expenditure on setting up an investment portfolio to purchase properties is incidental and relevant to outlaying the price of acquiring the investment (e.g., the property) or the setting up of a business. The expenditure is incurred at a point too soon for a deduction to be allowed.

In addition, paragraph 42 of TR 98/9 states that if a course of study is too general in terms of the taxpayer's current earning activities, the necessary connection between the self-education expenses and the income earning activity do not exist.

In your case, you have attended a real estate seminar and have become a fully paid member of a real estate education group. While we acknowledge that the knowledge gained may assist with the rental properties acquired before undertaking the workshop, the topics covered during the workshop and the benefits of being a member indicate that the knowledge gained is primarily to assist with purchasing, and developing a strategy for future investing, in properties.

Although it is accepted that the knowledge gained may be of some benefit to you in that you may be able to apply your knowledge and skills when selecting properties to purchase to increase the size of your property portfolio, it is considered that there is an insufficient connection between the topics and the earning of income from the new investment property.

The seminar and membership fees are incurred at a point too soon to be regarded as being incurred in the course of earning assessable income and are capital in nature. Therefore, the expenses incurred are not an allowable deduction under section 8-1 of the ITAA 1997.