Deductions for Investment Seminars

Reply: 1
From: Geoff Whitfield


Thanks for the pointer.

But I've visited the link. I says they're toey- and then gives you links to half a dozen places which all have masses of detail and masses of links. It makes one want to believe that perhaps ATO want to say "we warned you" by saying that they're investigating- but bury the detail in such a mass of detail that no ordinary individual can understand what they're saying.

Tax type people (read Dale), I'm sorry. But what's the bottom line? I've tries to find the relevant info, but it all seems hidden away somewhere.
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Reply: 1.1
From: Mike .

Hi Duncan,

Thanks for bringing this to our attention. So far the only Current Alert relating to wealth creation seminars is about taxpayers claiming significant tax deductions for partnership losses created by the acquisition of prepaid service warrants which are endorsed in favour of a client for a fee and redeemed for financial and wealth creation seminars.

There appears to be no clear guidelines as to whether we as investors can claim seminar fees eg Freestyler membership fees, tapesets etc as a "necessary" expense in gaining or producing assessable income from our property investments. I believe it is easier to do this if you are carrying on the "business" of property investment but for someone like myself who is a PAYE employee it can be argued that my investments don't amount to a business.

There is no doubt in my mind that seminars, books and tapesets can enhance one's knowledge and lead to better decision-making for building a portfolio but is this an expense or a capital cost? It is clear that if you are just starting out and are trying to build a knowledge base prior to purchasing your first IP that the ATO would deem it to be a capital cost and is, therfore, added to the cost base of your first purchase. A capital cost is deemed to be a cost necessary to acquire the property whereas a revenue expense is deemed to be a cost necessary to service or manage the property.'FOI/1100522P'PAC/19360027/51'#51(1)

However, if you already own one or two properties do seminar fees suddenly become a deductible expense? In my case, I have recently attended two seminars and am booked in for a third in September. The first one was about Forward Funding for property developers, the second was an introduction to property finance and the third will be about contracts and options. In addition, I have bought a number of books relating to property development, flipping and conveyancing. Are these purchases tax deductible? They are all property related but I am not a property developer nor have I done any flips to date although my intention is to do both in the future.

My situation is even more complicated because I incurred those expenses in the UK so do I declare them on my Aust tax return or UK tax return? My 3 IPs are in Aust and total rental income is $800 per week or $41,600 per year. A couple of online enquiries produced the following feedback:

Hi Michael

Self education expenses are only claimable under Australian Tax Law against wages and salary income, and only where it is directly linked to current employment. Can you give me a bit more information as to the exact nature of the self education, as it may be that it can be classified as something else?

I think this would then get down to whether or not the ATO considered that 3 properties were sufficient to be in business. I think it would be very unlikely. Of course, it would also depend on the extent of the claim. I do think it will be quite dfficult to obtain a deduction for the items you mention against rental property income.


Trish at eTAx Online Pty Ltd

Hi Michael

You are correct you will need to lodge a tax return in AUS for the Rental Property.

The self Education for your investements would not really relate to the rental property and therefore would have to be claimed in the UK.


Frank Brass

Not very helpful, is it?

The only Taxation Determination I could find is:

Income tax: are fees paid for obtaining investment advice an allowable deduction under subsection 51(1) of the Income Tax Assessment Act 1936 ('the Act') for taxpayers who are not carrying on an investment business?

There is no doubt that many people are claiming these as allowable deductions. Here is an example from a recent topic on the Singing Pig (UK) forum. This guy was responding to a statement I made earlier that the cost of seminars may not be tax deductible prior to owning at least one IP.

Whether you own a property or not is irrelevant, it's a business expense. If you buy a book on how to make money in property, it's a business expense. Just like if you bought advertising space that says "properties wanted" they are all business expenses. After all, you don't go to seminars for fun, well maybe but that's not the primary reason.

Regards, Eric

Hi Eric,

Are you guessing or is that what your accountant told you?


Hi Mike,

My accountant told me. Anything to do with business education or research is tax deductible. I even put all things such as magazines etc through my accounts as business research material.

Kind regards, Eric

The debate continues....Regards, Mike
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Deductions for Investment Seminars - Long

Reply: 1.1.1
From: Dale Gatherum-Goss


One of the reasons that you will find nothing specific is that until recently it was not an issue for the tax office to deal with.

As always, they lag behind what the real world is doing and then make decisions based on what they understand to have happened. . . (I apologise to those of you who work for the tax office as I understand that you follow guidelines set down by the people in the glass offices.)

The tax office issue warnings like this for two reasons:

It scares people off a little from claiming expenses that they might otherwise wish to claim; and

It creates an "indication of a policy" that the people who work for the tax office can use if they choose.

For employees, the rules with regard to education have been there a while and they state (paraphrased, of course) that the education must relate to your existing income and not a proposed income.

So, as an accountant I cannot normally do a course in french polishing and claim that as a tax deduction. However, as a business, I can create policies whereby staff are encouraged to undertake courses of self development and have those courses paid for the business as a legitimate tax deduction.

For businesses, courses that develop skills, knowledge and that motivate employees have been tax deductible under the general deductibility rules for quite some time.

Until recently, most investors could be classed into two main categories. Those who were serious players and those who were tinkering.

The tinkerers generally speaking did not undertake seminars and courses and so the tax office did not have to worry about this much at all.

The serious players invested via their trust or company and so were able to claim the seminars as personal or professional development anyway and so it was not an issue.

These days, every tom, rick, and dale ;-))have held seminars and the masses have become seminar junkies.

Finally, seminars started at prices like $30 and so this was not really much of a problem. However, with bootcamps and HK style prices, the issue has been forced and the tax office must do something to limit the loss of tax.

Hence the problem and their recent warning.

So, the $64m question is what do you do?

The answer will depend upon your own individual circumstances. If you are risk averse, you will no doubt walk away and not claim the costs of those big seminars as a tax deduction. If you are comfortable explaining why you went and how you feel that the cost related to your income, then fire away and good luck.

If you have existing investments it should be easier to get through the mire. If you attended seminars and have no investments, I believe that the tax office will attack you.

Good luck either way.

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Deductions for Investment Seminars - Long

From: Geoff Whitfield

Thank you Dale.

I wish ATO could say that as clearly as you have.

In regard to attending a seminar and claiming a deduction if you have no investments.

Could it be regarded as legitimate if you attend a seminar one financial year, and start investing in the next fy?

Also I would be concerned that these have been regarded as being claimable for some years by many professionals. For the ATO to "refine" their position some years after the initial investment might be seen by many to be unfair. I might attend a seminar with all the best intentions- but due to changed circumstances (eg, ATO disallowing agricultural investments) find myself unable to proceed along a particular path. And even more unfair if they therefore not only disallow the deduction- but fine me for making the claim.
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Deductions for Investment Seminars - Long

From: Dale Gatherum-Goss

Hi Geoff

Aaaah, the assumption that the tax laws are logical and fair - I love it!!

Unfortunately, tax law is neither and this creates problems of its own. A lot will depend upon the individual circumstances and the arguements that can be put forward.

No easy answers, I am afraid, as you know from our previous discussions about tax effective investments . . .

have fun and good luck

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Deductions for Investment Seminars - Long

From: Mike .

If the ATO is prepared to rule seminars out for investors then the same treatment should apply to Network Marketers. Their trade in seminars and tape sets is enormous. Most MLMers have got such a small business it more resembles a structure for discounted products since the distributors are also consumers of their own products. In addition, at least 50% of the content of their seminars and tapes are purely motivational which surely is outside the ATO's criteria for courses that develop skills and increase knowledge.

As far as revenue is concerned investors with one or two properties would create more income than most MLMers.

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Deductions for Investment Seminars - Long

From: Anonymous

Lots of generalisations in that post Mike...
There are lots of MLM systems out there, and they're not all the same, you know.
And for your information, the tax department actually DOESN'T allow MLMers with small businesses to claim costs of motivational / educational materials. A MLMer has to show that they have a viable small business, not just a discount buying club, before the tax office will allow business type tax deductions. For most MLMers this requires having quite a few people in their group.
I am quoting an accountant who deals extensively with MLMers and liaises frequently with the tax office on policy regarding MLM schemes. Other accountants may give you different feedback.
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Deductions for Investment Seminars - Long

From: Dale Gatherum-Goss


No, Mr or Ms Anonymous, any decent accountant would not tell you differently at all. The rules banishing MLM "pretend" businesses have been around for quite some time now.

Have fun

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Deductions for Investment Seminars - Long

From: Splinter Wood

Why should the ATO allow these deductions ??

Can you deduct the cost of doing a Medical Degree, MBA ?? Don't think so - and these are generally a legitimate expense.

Motivational courses (even the good ones)and supposed Investment Seminars are really 'Personal Development'.

Serious 'Licensed Investment Advisors' fees are deductible in most cases.

Fees for courses and Seminars run by scheisters like the HK's National Investment Institute, are deducted from your pocket only (if you are that gullible). They have all kinds of 'Disclaimers' in their agreements to say they are NOT giving 'Investment Advice', therefore the fees are NOT tax deductible (Thank God !)

Of course if you were unfortunate enough to get hooked in and pay the exhorbitant fees for such a course, you would be naturally be scrambling to try to recoup some of the money via a Tax Deduction. At last look, the ATO didn't hand out deductions for 'Foolish Expenditure'.

If you have been told you that such fees are Tax Deductible, you should seek legal advice immediately.

(No offense intended - just hate that the scum are still sucking in poor unsuspecting people)


PS Are the NII still in Business or in Prison ??
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RE: Deductions for Investment Seminars - Long

From: Duncan M

> Why should the ATO allow these deductions ??
> Can you deduct the cost of doing a Medical Degree, MBA ??
> Don't think so - and these are generally a legitimate expense.

Hi Splinter,

Whilst Private Binding Rulings can't be relied upon by an entity that it
wasn't lodged by they are a rich source of reference for how the Tax Office
thinks and applies various legislation, this exact issue for example has
been touched upon in this specific Private Binding Ruling and it backs up
what you are suggesting, i.e.. The expense is not deductible it is capital
in nature:

As usual, its not the legislation itself, just the interpretation that the
ATO puts on it, if ones feels differently then they can deduct and make
their argument at some, possibly, later date with the ATO.

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