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Edited version of your written advice
Authorisation Number: 1012889156385
Date of advice: 6 October 2015
Ruling
Subject: Work related expenses
Question
Are you entitled to claim a deduction for expenses incurred in obtaining your professional registration prior to commencing employment?
Answer
No
This ruling applies for the following period
The year ended 30 June 2015
The scheme commences on
01/07/2014
Relevant facts and circumstances
You are a professional working overseas.
You secured a contract of employment for a position as a professional in Australia.
The terms of the contract required you to obtain your professional registration prior to taking up the position.
Costs incurred included:
• interview fees,
• annual membership fees,
• exam fees, application fees and
• travel costs to attend interviews and sit for exams to meet the requirements of the registration.
You had not yet commenced work when these expenses were incurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Work related expenses
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA) 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.
Expenses which are incurred by an employee in obtaining employment or in changing jobs are not deductible because they come at a point too soon to be regarded as being incurred in gaining assessable income. These expenses are initial expenses and are of a capital nature. Section 8-1 specifically excludes deductions for expenses of a capital nature.
In Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549, the applicant claimed deductions for expenses that led to her admission as a solicitor. The admission expenses included advertising and travelling costs and the practising certificate fee. The Tribunal held that the admission expenses were of a capital nature and were therefore not an allowable deduction under subsection 51(1) of the Income Tax Assessment Act 1936 (which has been replaced by section 8-1 of the ITAA 1997). The admission expenses secured the applicant a 'lasting advantage'. The expenses were incurred in getting, not in doing, work as an employee. They came at a point too soon to be regarded as expenses incurred in gaining assessable income.
Your case is similar to Case Z1. You were required to obtain your Australian registration prior to beginning employment. Although it is acknowledged that you signed the employment contract before incurring the expenses, you could not start work and earn assessable income until after you obtained the registration.
Accordingly the expenses were at a point too soon, and are not deductible under section 8-1 of the ITAA 1997.