Edited version of private advice

Authorisation Number: 1052310575027

Date of advice: 16 October 2024

Ruling

Subject: Income tax - deductions

Question 1

Are you entitled to claim a deduction for your expenses in obtaining your initial occupation licence in State B prior to commencing employment under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

No.

Question 2

Are you entitled to claim a deduction for your expenses in renewing your occupation licence in State B under section 8-1 of the ITAA 1997?

Answer 2

No.

Question 3

Are you entitled to claim a deduction for a criminal history check when it is required to gain employment as occupation under section 8-1 of the ITAA 1997?

Answer 3

No.

This ruling applies for the following period:

DD MM YY

The scheme commenced on:

DD MM YY

Relevant facts and circumstances

Since XXXX you have been employed in a variety of roles in a specific industry.

On XXXX you moved from State A to State B.

On XXXX you completed an application to transfer an occupation licence from State A to State B. On the same day you also completed a criminal history check

On XXXX you commenced employment with Company A.

On XXXX you ceased employment Company A.

On XXXX, you completed a licence renewal for State B. On the same day you also completed a criminal history check.

On XXXX you commenced employment with Company B.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Are you entitled to claim a deduction for your expenses in obtaining your initial occupation licence in State B prior to commencing employment under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

No.

Detailed reasoning

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 98/6 Income tax: real estate industry employees - allowances, reimbursements and work-related deductions outlines work-related expenses incurred by real estate employees.

Paragraph 26 of TR 98/6 states:

26. The basic tests for deductibility of work-related expenses are set out in subsections 8-1(1) and (2) of the Act. The subsections provide that:

'(1)            You can deduct from your assessable income any loss or outgoing to the extent that:

(a)             it is incurred in gaining or producing your assessable income; or

(b)             it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.'

'(2)            However, you cannot deduct a loss or outgoing under this section to the extent that:

(a)             it is a loss or outgoing of capital, or of a capital nature; or

(b)             it is a loss or outgoing of a private or domestic nature; or

(c)             it is incurred in relation to gaining or producing your * exempt income; or

(d)             a provision of this Act prevents you from deducting it.'

Paragraphs 47 to 50 outline the deductibility of a certificate of registration.

47. In some States, a certificate of registration is required before a person can be employed to sell real estate.

48. A deduction is allowable for the cost of renewing a certificate of registration held by an employee in respect of his or her employment. A deduction is not allowable for the cost of obtaining the initial certificate of registration. These costs come at a point too soon to be regarded as incurred in the course of gaining assessable income.

49. In Case L38 79 ATC 208; 23 CTBR (NS) Case 44, a clerk at a State Treasury Department claimed expenditure incurred by him in gaining admission as a barrister and solicitor of the Supreme Court. His admission as a legal practitioner was an essential qualification for the position of legal officer to which he was subsequently appointed. The Board of Review disallowed the claim. In the Board's opinion the applicant had acquired an asset of enduring benefit, that answered the description of a capital asset or an asset of a capital nature.

50. 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 1936 Act. 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.

In your case, to obtain a role in State B you were required to complete an application to transfer your State A licence to State B. A deduction is not allowable for the cost of obtaining the initial certificate of registration. These expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income and are not deductible under section 8-1 of the ITAA 1997.

Question 2

Are you entitled to claim a deduction for your expenses in renewing your occupation licence in State B under section 8-1 of the ITAA 1997?

Summary

No.

Detailed reasoning

Paragraph 48 of TR 98/6 states:

48. A deduction is allowable for the cost of renewing a certificate of registration held by an employee in respect of his or her employment. A deduction is not allowable for the cost of obtaining the initial certificate of registration. These costs come at a point too soon to be regarded as incurred in the course of gaining assessable income.

The general principles of section 8-1 of the ITAA 1997 also need to be applied. To claim a deduction for a work-related expense: the expense must directly relate to earning your income.

In your case, you paid for the State B licence renewal on XXXX. From XXXX to 3 XXXX, you were not employed.

Therefore, at the time you incurred the expense to renew your State B, you were not undertaking income-earning activities to derive assessable income. These expenses are not connected to any income-earning activity at the time they were incurred. You are not entitled to claim a deduction for your expenses in renewing a State B licence under section 8-1 of the ITAA 1997.

Question 3

Are you entitled to claim a deduction for a criminal history check when it is required to gain employment under section 8-1 of the ITAA 1997?

Summary

No.

Detailed reasoning

Paragraphs 177 to 179 of TR 98/6 states: A deduction is not allowable for the cost of obtaining a police clearance certificate.

177. In nearly all States and Territories, employers require occupation employees to obtain a police clearance certificate when entering the industry.

178. A deduction is not allowable for the cost of obtaining police clearance certificates.

179. Although the police clearance certificate may be necessary for employment into the industry, the expense is an outgoing that precedes the earning of assessable income. It is not an expense incurred in the course of gaining assessable income.