Draft Taxation Determination

TD 93/D128

Income tax: is expenditure incurred by an employee in applying for a promotion deductible under subsection 51(1) of the Income Tax Assessment Act 1936 ?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 93/175.

FOI status:

draft only - for comment

Preamble

1. Generally yes. If the expenditure will objectively lead to, or will be likely to lead to, an increase in the employee's assessable income without effecting a change in the employee's current income-earning activities, it will be deductible under subsection 51(1).

2. However, we consider that if the expenditure is incurred in applying for a promotion which will involve a change in the employee's current income-earning activities, it will not be deductible. This proposition is supported by the joint consideration of the decisions in Case Z1 92 ATC 101; 22 ATR 3549 and FC of T v Maddalena 71 ATC 4161; 2 ATR 541. Specifically, it is considered that if the promotion will result in the opening up of a new income-producing activity for the employee, the expenditure is not deductible because, "it would come at a point too soon to be properly regarded as incurred in gaining assessable income." FC of T v Maddalena 71 ATC 4161 at 4163; 2 ATR 541 at 549.

Example 1

A school teacher applies for three Deputy Principal positions during an income year which requires the following expenditure to be incurred:

The expenditure is considered to be deductible under subsection 51(1) because it will objectively lead to, or will be likely to lead to, an increase in the taxpayer's assessable income without causing a change in his/her current income-producing activities.

Example 2

After completing a law degree through part-time study, a clerk in the public service applies for a position as a solicitor with another government department. Expenditure similar to that which is contained in Example 1 is incurred as a result of the successful application.

We consider that the expenditure is not deductible under subsection 51(1) because it is incurred in opening up a new income-earning activity for the taxpayer, and consequently, "...would come at a point too soon to be properly regarded as incurred in gaining assessable income."

Commissioner of Taxation
27 May 1993

References

BO ALB/APPE/4

Subject References:
application for promotion
expenditure
deductibility

Legislative References:
ITAA 51(1)

Case References:
Case Z1
92 ATC 101
22 ATR 3549

FC of T v Maddalena
71 ATC 4161
2 ATR 541