Private ruling: Self-education deductions
Published: September 2014
Ruling period: Income year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for expenses incurred in attending a Property Income Education Course? | A1: No

Relevant facts and circumstances: You are a property investor. You have a portfolio of rental properties which you derive rental income from. You attended a Property Income Education course. The course focused on a foreign rental property market. The course covered the following: • what business structures to use • how foreign taxes work • what areas to purchase property in • due diligence to be performed before purchasing property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: Subsection 8-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of producing assessable income. Subsection 8-1(2) of the ITAA 1997 however, excludes a loss or outgoing of a capital, private or domestic nature, or where the loss or outgoing is incurred in gaining or producing exempt income. For a deduction to be allowed under the first limb of subsection 8-1(1) of the ITAA 1997, the expenditure must be incidental and relevant in the sense of having the essential character of expenditure incurred in the course of gaining or producing assessable income. There must be a sufficient connection between the expense and the operations or activities which gain or produce the assessable income. Refer the judgement of Lockhart J in Federal Commissioner of Taxation v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616. In your circumstances the content of the seminar related to future property investment in a different market to which you currently invest in. As such the primary purpose of the seminar was to give the taxpayer the required knowledge to establish a strategy or structure for investing in rental properties as opposed to skills in managing and maximising current property investments. The cost of the seminar is incurred at a point too soon to be incidental and relevant to the taxpayer's income earning activities from any future investment properties (Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). There is insufficient connection between this expense and the earning of rental income from current investment properties. This expenditure does not have the essential character of expenditure incurred in gaining or producing assessable income. Accordingly, as this expenditure is not incurred in gaining or producing assessable income no deduction is allowable under subsection 8-1(1) of the ITAA 1997.