Private ruling: Rental property expenses
Date of advice: 7 August 2015
Published: August 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you able to claim a deduction for the costs of attending a real estate investment course (the course)? | A1: No.

Relevant facts and circumstances: You are employed. You are also a property investor. You currently have two investment properties in your portfolio. You completed the course in the financial year ended 30 June 2015. After you completed the course, you purchased your second investment property. You contend that the course has greatly helped you in identifying the right area and right type of property for generating current and future income. With the help of the course, you are planning to buy more investment properties. You undertook the course for the purpose of future investments rather than anything related to the one investment property you held at the time of completing the course.

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

Reasons for decision: Summary: 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. Expenses incurred in relation to a rental property are generally deductible under section 8-1 of the ITAA 1997, to the extent that the property is held for income-producing purposes and genuinely made available for rent. Taxation Ruling TR 95/33 discusses the relevance of the subjective purpose, motive or intention in determining the deductibility of an expense. The ruling states that an expense will generally be deductible if its essential character is that of expenditure that has a sufficient connection with the operations or activities which more directly gain or produce your assessable income. The essential character of an expense is a question of fact to be determined by reference to all the circumstances. | Detailed Reasoning - Application to your circumstances: In your case, you have incurred expenses to attend a real estate investment course. You have stated that the course was an educational and mentoring program relating to property investing, teaching people the know-hows of how to buy the right types of properties in the right areas. You have also stated that the main purpose of undertaking the real estate investment course was to give you the knowledge to use in future property investment. As such, the expenses related to the seminar are considered to have been incurred at a point too soon to have been incurred in earning assessable income. Accordingly, as this expenditure is not incurred in gaining or producing assessable income no deduction is allowable under section 8-1 of the ITAA 1997.