Private ruling: Work Related Expenses - Self Education
Date of advice: 8 June 2016
Published: July 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are the costs that you incurred in undertaking a Graduate Diploma of Legal Practice deductible? | A1: No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You have a Bachelor of Laws. You are currently undertaking a Graduate Diploma of Legal Practice. You started your Graduate Diploma of Legal Practice in the relevant income period. You commenced working as a Judge's associate before starting your Graduate Diploma. This job does not require you to be a lawyer but it does require you to have a Bachelor of Laws and use various practical legal skills. The Graduate Diploma of Legal Practice will provide you with the skills to practice as a lawyer and further into the future allow you to be admitted as a lawyer. You are currently required to conduct legal research, analyse cases and court documents, and have a good knowledge of the process of litigation. You believe the Graduate Diploma of Legal Practice will improve your legal research and analysis skills, as well as give you a better understanding of civil litigation procedures. These are all skills used, in your current employment.

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

Reasons for decision: Summary: You are not entitled to claim a deduction for the expense incurred in completing a Graduate Diploma in Legal Practice. | Detailed Reasoning - Graduate Diploma of Legal Practice: 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 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. Paragraphs 13 and 14 of TR 98/9 provide that self-education expenses will satisfy the requirements of section 8-1 of the ITAA 1997 if: • a taxpayers income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge; or • the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from their current income-earning activities in the future. Therefore, where there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income ( FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). TR 98/9 provides the following example: Desiree is a general medical practitioner in partnership with two other general practitioners in a large regional town. She undertakes further study in dermatology in order to set herself up independently as a specialist dermatologist. The expenses related to the study are not allowable as the study is designed to open up a new income-earning activity as a specialist. In your circumstances, you began performing duties as a Judge's Associate after you completed your law degree. You are not required to be admitted as a solicitor to complete your duties. You then undertook a Graduate Diploma in Legal Practice, a specialised course designed to enable individuals to gain admittance as a qualified solicitor, developing the skills of people intending to become solicitors. However, even though the knowledge gained from the Graduate Diploma of Legal Practice is of assistance as a Judge's Associate, this is subsidiary to the main reason for undertaking the course, which is, becoming a solicitor. Whilst there is some relation to your employment and your course of study, it is accepted that the main reason for completing this course is to open up a new income earning activity, that is, you cannot be admitted to practice as a legal practitioner until you have met all the formal qualifications required including completing this course. Therefore, the expense of those studies is incurred at a point too soon to be regarded as having been incurred in gaining your assessable income and you are not entitled to a deduction for this expense under section 8-1 of the ITAA 1997.