Private ruling: A deduction is not allowed for guests attending a graduation and is not considered a self-education expense
Date of advice: 12 July 2019
Published: September 2019
Ruling period: 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the cost of inviting your family as guests to your Chartered Accountant certificate presentation ceremony (graduation) deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Is the cost of inviting your family as guests to your Chartered Accountant certificate presentation ceremony (graduation) a self-education expense as per section 82A of the Income Tax Assessment Act 1936 (ITAA 1936)? | A2: No.

Relevant facts and circumstances: You completed a professional qualification. Your employer paid for your course. You work as a professional. After completion of your degree you received an email from Entity A, congratulating you on being accepted into a profession a body and inviting you and yours guests to attend a ceremony to be the following month. Attendance was complimentary for new members receiving their Certificates of Membership. Guests and mentors were able to attend with a charge of $X per person. You felt obliged, though not necessarily required, to invite a number of members of your family. Your mentor was one of the people you invited. Your employer opted not to pay for the guests that you invited to the graduation. You paid for the guests yourself. You stated that there is an expectation to celebrate graduation with family.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1936 section 82A

Reasons for decision: Summary: A deduction is not allowed for guests attending a graduation and is not considered a self-education expense. The expense is not incurred in gaining or producing your assessable income and is considered to be private or domestic in nature. | Detailed Reasoning - 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 your assessable income, except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Factors in determining the deductibility of a loss or outgoing comprising study expenses, require being able to show that it is incurred by the taxpayer in gaining or producing assessable income of the taxpayer and the loss or outgoing is not capital, or of a capital, private or domestic nature; or necessarily incurred by the taxpayer in carrying on a business for the purpose of gaining or producing assessable income of the taxpayer and the loss or outgoing is not capital, or of a capital, private or domestic nature. A number of significant court decisions have determined that for an expense to be an allowable deduction: · it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T (1958) 100 CLR 478, · there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v. FC of T , (1949) 78 CLR 47), and · it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore Co (WA) Pty Ltd v. FC of T , (1956) 95 CLR 344; FC of T v. Hatchett , 71 ATC 4184). Generally, study expenses incurred for income producing purposes are deductible under section 8-1 of the ITAA 1997, to the extent that it is not capital, private or domestic in nature. The essential character of the expense is a question of fact to be determined by reference to all the circumstances. In Berrett v FC of T 99 ATC 2127, (1999) 41 ATR 1262 the taxpayer drove interstate to attend their degree conferring ceremony and claimed a deduction for travel, accommodation, hiring academic dress and framing the degree. It was held that the costs of attending a graduation ceremony (including the cost of hiring an academic gown) are not deductible. The course of study and its completion are what had the requisite nexus with the gaining of assessable income. It was a personal choice to travel to the conferring ceremony as the degree was able to be received in absentia. Whether the taxpayer attended the conferring ceremony or was received in the post had no impact on the knowledge or ability to carry out his employment duties. The deduction on travel, accommodation and academic dress was not deductible. The cost of maintaining the physical degree in its pristine condition had nothing to do with gaining his assessable income. The above would apply to the attendance of your guests to your graduation as it did not impact on your knowledge or ability to carry out your employment duties or relate to gaining your assessable income. The deduction is not allowable under section 8-1 of the ITAA 1997. A deduction would also not be allowed for solely the attendance of your mentor either. Self-education expenses Section 82A of the Income Tax Assessment Act 1936 (ITAA 1936) relates to deductions for expenses of self-education. It states that "expenses of self-education means expenses necessarily incurred by the taxpayer for or in connection with a prescribed course of education..." It then lists various exclusions. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business reiterates the above at paragraph 26. It also goes on to state that these expenses do not include a student contribution amount or an amount in repayment of a debt as specified in that subsection. It further states that compulsory and unavoidable expenses, as well as those that relate to fulfilling the course requirements, are considered 'necessarily incurred'. Paragraph 126 of TR 98/9 discusses expenses not 'necessarily incurred' and gives the example of meals purchased while travelling to and from an educational institution when not sleeping away from home, as not being regarding as 'necessarily incurred' when applying section 82A of the ITAA 1936. The expenditure is a private matter and not connected with the course of education. In your instance, the cost of having guests attend the graduation ceremony are not 'necessarily incurred' in terms of section 82A of the ITAA 1936 as they are private in nature. Attendance of guests and yourself was not mandatory to the completion of the degree or the learning outcomes.