| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051475720103
Date of advice: 25 January 2019
Ruling
Subject: Self-education
Question
Will the 'Practical Legal Training' expenses be claimable as a self-education expense?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2018
The scheme commences on:
1 July 2017
Relevant facts and circumstances
You were employed as a paralegal.
You were employed for three months.
Your position was casual employment and could be terminated without notice.
You were not guaranteed ongoing work.
You studied a Practical Legal Training course (the course).
You were studying while you were working.
The subjects you studied were:
● Lawyer’s Skills
● Ethics and Professional Responsibility
● Civil Litigation Practice
● Commercial and Corporate Practice
● Consumer Law Practice
● Banking and Finance Practice
You have paid for the course.
You state you undertook this course to retain your job.
You undertook this course to develop your practical skills.
You undertook this course to have better prospects of finding other paralegal positions.
You were offered another position as a paralegal in a different area for the same employer.
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 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. Self-education expenses are deductible under section 8-1 of the ITAA, where there is a relevant connection to the taxpayer’s current income earning activities.
Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business details the circumstances under which a deduction is allowable for self-education expenses. Self-education expenses are an allowable deduction if a taxpayer’s income earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayers to maintain or improve upon that skill or knowledge (paragraph 13 of TR 98/9).
In addition, 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, the self-education expenses are allowable as a deduction.
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.
The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
A paralegal is defined as someone who works in a law company or a company’s legal department and has some legal training, but does not have all the qualifications to be a lawyer. It is an entry point into the legal profession to gain crucial legal work experience before applying for a training contract.
Practical Legal Training is a structured training program. It is designed to help develop the practical knowledge and day-to-day skills needed as a lawyer. The coursework component of the Practical Legal Training Program will enable you to develop competency in the practice areas and professional skills required for admission as a legal practitioner.
Although you may gain knowledge and skills from the program that could be of some assistance in your work as a paralegal, the predominant focus of the course is designed to open up a new income earning activity, that of a solicitor. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties as a paralegal and the program. The program enables you to develop competency in the practice areas and professional skills required for admission as a legal practitioner.
The Practical Legal Training course you undertook will secure you a lasting advantage, that of becoming a solicitor. Consequently, the self-education expenses you have incurred do not have the necessary and relevant connection with earning of your assessable income as a paralegal. Therefore you are not entitled to a deduction for self-education expenses.