Private ruling: Deductibility of supervision expenses
Date of advice: 9 June 2021
Published: August 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for supervision fees? | A1: No.

Relevant facts and circumstances: You are required to complete a period of internship which requires supervised practice prior to becoming a fully qualified practitioner. You have a part-time role as a provisional practitioner. In order to gain full registration as a practitioner you are required to pay supervision fees as part of your internship. As a fully registered practitioner you would also be required to complete supervision throughout the working year.

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

Reasons for decision: Summary: Work-related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing your assessable income, unless they are of a capital, private or domestic nature. The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business . The ruling explains that, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, as stated in paragraph 15 of TR 98/9, such expenses will not be deductible if the study is intended to: • enable you to get employment, • enable you to obtain new employment, or • to open up a new income-earning activity (whether in business or in your current employment). In such cases the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. In Assefa v FC of T [2009] AATA 2 (Assefa's case), it was considered whether studying a course of education in order to advance to a higher classification of nursing was opening up a new income earning activity. The taxpayer in this case is employed as a personal care assistant while studying to become an enrolled nurse. The AAT held in Assefa's case that no deduction was allowable for the self-education expenses. It was determined that there was a significant difference between the position of enrolled nurse on one hand, and personal care assistant/nursing assistant on the other. The taxpayer was not considered to be incurring the expenditure in gaining or producing her assessable income, but was studying towards their initial qualification as an enrolled nurse. This decision can be applied to your circumstances. You are currently practising supervised practitioner which is a prerequisite to you becoming a fully registered practitioner. We view this as leading up to a new income-earning activity. While we acknowledge that you have attained the skills and you have commenced earning income in the relevant field, the predominant focus of the internship is to provide qualifications to become a fully registered practitioner. As such, the supervision expenses are incurred at a point too soon to be regarded as having been incurred in gaining or producing your assessable income, and are therefore not deductible. The expenses incurred are more properly characterised as expenses incurred for the purposes of obtaining a new position or opening up a new income-earning activity. Once you have attained full registration as a practitioner the ongoing fees paid in relation to supervision will become a deductible expense for you.

This ruling applies for the following period: