Edited version of private advice

Authorisation Number: 1052039189294

Date of advice: 10 November 2022

Ruling

Subject: Work related deductions

Question

Are you entitled to a deduction for the costs associated with your additional duties?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 2020

Relevant facts and circumstances

The taxpayer is employed in a professional capacity.

The taxpayer was offered a transfer to a different branch of their employer's organisation.

Transfer to the specialised branch has not yet been granted. If the taxpayer is successful in the application to the role, they will be added to a pool to be given the role sometime in the future.

The taxpayer has incurred expenses in training for the new role during the relevant financial year.

The training improves the taxpayer's skills and widens their repertoire of available skills.

The taxpayer has been completing weekly training.

The training was paid at the time of each lesson throughout the year.

The taxpayer is not receiving an allowance to cover the expenses or any reimbursement from their 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 1997 where they have a relevant connection to the taxpayer's current income earning activities.

Taxation Ruling TR 98/9 considers the deductibility of self-education expenses and states that if a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

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 a new income earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a 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 nodeduction is allowable for self-education expenses if the study isdesigned to enable a taxpayer to get employment or to obtain newemployment. Such expenses are incurred at a point too soon to beregarded as incurred in gaining or producing assessable income.

Case J30 77 ATC 282; 21 CTBR (NS) Case 52 and Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549, deal with claims made by law clerks for admission fees to practise. The claims were disallowed as it was found that the expenses secured the applicants a 'lasting advantage' and as such, were capital in nature.

Although the taxpayer may gain knowledge and skills from the training that could be of some assistance in their work, the predominant focus of the training is designed to open a new income earning activity.

The taxpayer is not required to complete the training in order to secure a position in a different branch of the organisation.

The taxpayer has undertaken the training to increase their opportunity to be placed in the pool to be chosen to join the branch.

The expenses do not have the necessary and relevant connection with the earning of the taxpayer's assessable income. The expenses have been incurred at a point to soon to be able to qualify as a deduction.

Further information

Self-education expenses are those expenses associated with acquiring a "recognised award" from a place of education. Where a taxpayer incurs expenses associated with learnings that are not a formal qualification from a recognised school, college, university or other place of education but have a sufficient connection with the taxpayer's income producing activities, they may be deductible as 'Other work-related expenses'.

In the taxpayer's case it does not appear the expenses incurred are 'self-education expenses'. Based on the information provided the taxpayer has not acquired a formal qualification. Nevertheless, applying the principles to determine deductibility of self-education expenses, these expenses do not have a sufficient connection with the taxpayer's income producing activities. Therefore the taxpayer is not entitled to a deduction for self-education expenses or other work-related expenses.