All Topics / Legal & Accounting / Seminars as a Rental Expense
Hi All,
Caught this on the ATO website – thought it may be of interest.
“Income Tax
Rental expenses: property investment seminarIssue
Is the taxpayer, who derives income from rental properties, entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in attending a property investment seminar?
Decision
Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for expenses incurred in attending a property investment seminar to the extent that the expenses relate to the gaining or producing of assessable income from their rental properties.
Facts
The taxpayer owns several residential properties which have been rented out for a number of years.
The taxpayer is not carrying on a business of letting properties.
In each of the years the properties were rented the taxpayer has included rent in assessable income and claimed expenses against that income.
The taxpayer incurred expenses, including airfares, accommodation and fees in attending a property investment seminar and workshop. The taxpayer’s sole purpose in travelling was to attend the seminar and workshop.
The seminar focussed on investment strategies and techniques in relation to both commercial and residential properties. The seminar included such topics as developing investment business plans, strategies for dealing with financiers, developers and real» «estate» «agents, maximising opportunities for increasing investment property ownership and maximising the return on current investment properties.
The seminar was conducted over two days with approximately 20% of the time spent in providing information about the management of rental properties and maximizing rental income.
The taxpayer intends to use the information gained about management of rental properties to reduce expenses incurred in relation to their investment properties.
The taxpayer has not acquired any further investment properties since attending the investment seminar.
Reasons for Decision
Subsection 8-1(1) of the ITAA 1997 allows a deduction for any loss or outgoing to the extent that it is incurred in gaining or producing assessable income, or is necessarily incurred in carrying on a business for the purpose of producing assessable income. Subsection 8-1(2) of the ITAA 1997 however, excludes a loss or outgoing of a capital, private or domestic nature, or where the loss or outgoing is incurred in gaining or producing exempt income.
For a deduction to be allowed under the first limb of subsection 8-1(1) of the ITAA 1997, the expenditure must be incidental and relevant in the sense of having the essential character of expenditure incurred in the course of gaining or producing assessable income. There must be a sufficient connection between the expense and the operations or activities which gain or produce the assessable income. Refer the judgement of Lockhart J in Federal Commissioner of Taxation v. Cooper (1991) 29 FCR 177; 91 ATC 4396; (1991) 21 ATR 1616.
In this case, a significant proportion of the content of the seminar related to future property investment. As such the primary purpose of the seminar was to give the taxpayer the required knowledge to establish a strategy or structure for investing in rental properties.
The proportion of the cost of the seminar that relates to this primary purpose is incurred at a point too soon to be incidental and relevant to the taxpayer’s income earning activities from any future investment properties ( FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). There is insufficient connection between this expense and the earning of rental income from current investment properties.
This expenditure does not have the essential character of expenditure incurred in gaining or producing assessable income. Accordingly, as this expenditure is not incurred in gaining or producing assessable income no deduction is allowable under subsection 8-1(1) of the ITAA 1997.
The proportion of the cost of the seminar that dealt with the management of current rental properties and maximizing the income from those investments is incidental and relevant to the taxpayer’s current income earning activities and therefore is deductible under section 8-1 of the ITAA 1997. In establishing this connection the taxpayer was able to point to how they intend to reduce their rental expenses as a result of the information they gained from the seminar.
There must be a reasonable basis for the apportionment of the total cost between deductible and non deductible components. An apportionment based upon the time spent in the seminar relating to deductible (that is 20%) and non deductible expenditure (that is 80%), is a reasonable basis for apportionment. Accordingly a deduction for 20% of the total cost in attending the seminar is allowable under subsection 8-1(1) of the ITAA 1997.
Date of decision: 21 March 2003
Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
subsection 8-1(1)Case References:
Federal Commissioner of Taxation v. Cooper
(1991) 29 FCR 177
(1991) 21 ATR 1616
91 ATC 4396Federal Commissioner of Taxation v. Maddalena
71 ATC 4161
(1971) 2 ATR 541Keywords
Deductions & expenses
Real estate related expenses
Rental expensesDate of publication: 15 May 2003
ISSN: 1445-2782″
End Quote
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
So in short property investors are only allowed to claim 20% of seminar costs in most cases ?
Hey Bennido,
Look at this way; education isn’t free, and so really IMO any refund/deduction is better than nothing!!!
Jo
Can’t really argue with that statement …
Well, if you pay $1000 for a course… and $200 of that is deductible, and you are on the highest taxable income @50% tax, you get back $100 = 10% of the cost. That’s kind of like an argument for negative gearing. I think RE education *is* free- on forums like this, and by reading whatever one can lay one’s hands on, including media articles.
If one wanted to try out any RE strategies- developing, flipping, B&H, using depreciation, etc etc, one can do them without using expensive seminars. I think many people attend seminars for confidence, as well as anything else. Certainly most seminars have a personal development component to them these days.
I bet many, many people on here who haven’t attended seminars feel happy with the choices they’ve made in RE.
I went to the Money Expo in Sydney today- so many seminars are on right now- including that zany guy, Roy McDonald- oh, he’s back- I’m excited- I love cults! I really wanna go to his- except I’d be a bit worried about the lack of food and the sleep deprivation- hehe. I was told he has seminars from $1000 – $20,000. I wonder what “secrets” he reveals at his 20k seminar. He must have lots of them up his sleeve to charge those kinda prices.
http://www.fatherdave.org/Press%20Clippings/2003-09-13-Herald-text-version.htm
kay henry
Thanks for that McDonalds link, Kay Henry [biggrin].
It would be so much fun to go to one of his bizarre seminars- just to see how the guy operates, how crazy things can get in there [mad]. We could sneak in little le snacks (oh no they’re too noisy to eat, something softer like jellybeans perhaps) and we could wear those glasses [suave] with eyes painted on them so it would look as if we were awake [sleepyanim].Could we also claim the time we’d actually spend sleeping behind these wide-open eyes glasses?
Celivia
Kay
Thank you for those links. I actually did this course about 3 years ago and paid about $5000. Luckily I obtained a refund – only after many letters and complaints.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hey guys,
I also did his course late last year, Nov03, unlike Terry W I was told I wasn’t entitled to a refund, due to a new clause they had put in.Corey Corby
How about a free seminar on rental properties. It is manly in relation to managing them and CGT consiquences. Further as I am a registered tax agent travel to listen to me is tax deductible anyway. The seminars start at 6.30pm at
Caboolture RSL Monday 27th Sept
Maroochydore RSL Tuesday 14th Sept
Please ring 07 54976777 so we know how many cuppas to have ready. Just the answers damn straight no personal development.Julia Hartman
http://www.bantacs.com.auIf you cant BAN TACS at least minimise it legally
Julia,
Do you have your own people in sydney who do seminars like that? And no personal development- that’s refreshing.
kay henry
Kay Henry,
Sorry on Queensland
Julia
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