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Edited version of your written advice
Authorisation Number: 1012868732030
Date of advice: 28 August 2015
Ruling
Subject: Work-related and self-education expenses
Issue 1
Self-education expenses
Question 1
Can you claim a deduction for self- education fees post retirement?
Answer
No
Issue 2
Registration and renewal fees - work related expenses
Question 1
Can you claim a deduction for work related expenses (registration and renewal fees) post retirement?
Answer
No
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
You retired from the public service.
You have not earned assessable income since retirement.
You have incurred costs that are necessary to help you gain employment post retirement.
You were granted a restricted practising certificate after retirement and incurred expenses relating to the certificate fee, fidelity fund and membership fees.
You must be supervised by a solicitor with an unrestricted license whilst on a restricted license; you have been unsuccessful at this point in time to meet this condition.
You currently undertake pro bono work at a community legal centre.
You renewed your registration as a mediator with Institution A at the cost of $ XX; this registration was held prior to retirement.
You completed a course on legal practice management at the cost of $ XX to meet a condition of the restricted practicing certificate.
You also completed another course, post retirement at the cost of $ XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Section 8-1 of the 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 95/9 discusses the deductibility of expenses incurred by employees engaged in the legal profession. This ruling recognises that for an expense to be deductible it must first meet the deductibility tests. They are as follows;
a) It must have the essential character of an outgoing incurred in gaining assessable income or an income producing expense;
b) There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income; and
c) It is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income.
Based upon the facts provided by you, the registration and renewal expenses incurred post retirement does not satisfy the deductibility tests in section 8-1 of the ITAA 1997. Deductibility depends on the earning of assessable 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 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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348.
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, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 62 of TR 98/9).
In your case the studies you have undertaken is in order to obtain employment in a new field and are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income and therefore such expenses are not deductible.