Ionita and Commissioner of Taxation (Taxation)
[2024] AATA 808
•19 April 2024
Ionita and Commissioner of Taxation (Taxation) [2024] AATA 808 (19 April 2024)
ReviewNumber: 2022/0202; 2022/0203; 2022/0204; 2022/0205
Division:TAXATION AND COMMERCIAL DIVISION
File Numbers: 2022/0202; 2022/0203; 2022/0204; 2022/0205
Re:Alice Ionita
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Senior Member Dr M Evans-Bonner
Date:19 April 2024
Place:Perth
The Reviewable Decisions in applications 2022/0202; 2022/0203; 2022/0204 and 2022/0205 are affirmed.
.....................[Sgd]...................................................
Senior Member Dr M Evans-Bonner
CATCHWORDS
INCOME TAX – whether allowable deductions for income years ending 30 June 2015, 30 June 2017, 30 June 2018 and 30 June 2019 – Applicant was an overseas qualified dentist, working as a dental technician in Australia – Applicant claimed cost of written and practical exams undertaken to be registered to practise as a dentist in Australia as a self-education expense – associated meals, accommodation and flight expenses also claimed – whether self-education expenses incurred in gaining or producing assessable income – whether there is a sufficient connection between the Applicant’s expenses incurred and her income earning activities – whether self-education could have led to an increase in income – Reviewable Decisions affirmed
LEGISLATION
Income Tax Assessment Act 1997 (Cth) ss 8-1, 8-1(1), 8-1(1)(a), 8-1(1)(b), 8-1(2)
Income Tax Assessment Act 1936 (Cth) s 51(1)
Taxation Administration Act 1953 (Cth) s 14ZZK
CASES
Anders and Commissioner of Taxation [2023] AATA 1471
Commissioner of Taxation v Day [2008] HCA 53
Commissioner of Taxation v Firth [2002] FCA 413
Commissioner of Taxation v Payne [2001] HCA 3
Commissioner of Taxation v Studdert [1991] FCA 593; (1991) 33 FCR 75
Commissioner of Taxation v Smith (1978) 36 FLR 95
Clough Limited v Commissioner of Taxation [2021] FCAFC 197
Federal Commissioner of Taxation v Finn [1961] HCA 61; (1961) 106 CLR 60
Federal Commissioner of Taxation v Hatchett [1971] HCA 47; (1971) 125 CLR 494
Federal Commissioner of Taxation v Kropp (1976) 6 ATR 655
Federal Commissioner of Taxation v Maddalena (1971) 2 ATR 541
Federal Commissioner of Taxation v Roberts (1992) 39 FCR 118
Ting and Commissioner of Taxation [2015] AATA 166
SECONDARY MATERIALS
Taxation Ruling 98/9 – Income Tax: deductibility of self-education expenses incurred by an employee or a person in business
REASONS FOR DECISION
Senior Member Dr M Evans-Bonner
19 April 2024
THE APPLICATION
The Applicant qualified as a dentist in Romania.
She moved to Australia to live in 2012 and commenced working as a dental technician in 2013.
The Applicant wanted to become registered to practise as a dentist in Australia. To be able to do so, she was required to meet the requirements of the Dental Board of Australia (DBA), including undertaking an initial assessment and then completing written and practical examinations facilitated by the Australian Dental Council of Australia (ADC).
The Applicant sought to claim tax deductions pursuant to s 8-1(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for costs associated with her examinations to become registered as a dentist in Australia as well as associated meals, accommodation, and flight expenses.
The deductions were claimed for the income years ending 30 June 2015, 30 June 2017, 30 June 2018, and 30 June 2019. I will refer to these as the Relevant Income Years. There are four application numbers because the expenses claimed concern four income years.
In an objection decision dated 9 December 2021 (Reviewable Decision), the Deputy Commissioner of Taxation approved an extension of time but disallowed an objection by the Applicant dated 28 September 2021 to notices of assessment issued by the Respondent for the Relevant Income Years. That objection included a request for an extension of time to lodge objections and to increase the self-education expenses claimed in the Relevant Income Years.
The Applicant has made an application to the Tribunal seeking review of the Reviewable Decision.
THE CLAIMED DEDUCTIONS
When the Applicant lodged her objection dated 28 September 2021, she claimed additional work related self-education expenses totalling $16,643.46 under Label D4. This sum can be broken down as follows:
·For the Income Year ended 30 June 2015: $610 for an Initial Assessment (General Dentistry) and $1,500 for a Written Examination (General Dentistry), totalling $2,110.
·For the Income Year ended 30 June 2017: $2,000 for a Written Examination (General Dentistry), and $2,000 for a second Written Examination (General Dentistry), totalling $4,000.
·For the Income Year ended 30 June 2018: $4,500 for a Practical Examination (General Dentistry).
·For the Income Year ended 30 June 2019: $4,500 for a Practical Examination (General Dentistry), $726.85 for Meals and accommodation, and $806.61 for Flights.
The Applicant is of the view that the $16,643.46 comprises work related self-education expenses (and associated costs) that should be tax deductable.
The Respondent disagrees that the expenses are tax deductible and submits that they were not incurred in gaining or producing the Applicant’s assessable income, as required by s 8-1(1) of the ITAA 1997.
LEGAL FRAMEWORK
Legislative provisions
Subsection 8-1(1) of the ITAA 1997 provides that:
(1) You can deduct from your assessable income any loss or outgoing to the extent that:
(a) it is incurred in gaining or producing your assessable income; or
(b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.
(Original emphasis. Notes omitted.)
Subsection 8-1(2) of the ITAA 1997 provides that certain losses or outgoings are not deductable:
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
(a) it is a loss or outgoing of capital, or of a capital nature; or
(b) it is a loss or outgoing of a private or domestic nature; or
(c) it is incurred in relation to gaining or producing your exempt income or your non–assessable non–exempt income; or
(d) a provision of this Act prevents you from deducting it.
The Applicant was working as a dental technician for an employer, and so s 8-1(1)(a) is the relevant sub-section. She was not carrying on a business and so s 8-1(1)(b) is not applicable.
Caselaw
In Commissioner of Taxation v Payne [2001] HCA 3 (Payne), the High Court of Australia considered the meaning of “in gaining or producing the assessable income” in s 51(1) of the Income Tax Assessment Act 1936 (Cth), which was the predecessor to s 8-1 of the ITAA 1997.
The High Court explained, at [7]-[9]:
As the majority of the Full Court pointed out, the general principles governing the construction (and we would add the application) of s 51(1) are familiar. Under the first limb of s 51(1), outgoings incurred in gaining or producing the assessable income of the taxpayer are deductible. The sub-section requires the identification of a loss or outgoing, an understanding of what is meant by “the assessable income”, and the identification of a particular connection between the two.
The expression “the assessable income” is not to be given a narrow meaning. In particular, it has been said that:
“[it] is not to be read as confined to assessable income actually derived in the particular tax year. It is to be construed as an abstract phrase which refers not only to assessable income derived in that or in some other tax year but also to assessable income which the relevant outgoing ‘would be expected to produce’.”
The connection which must be demonstrated between an outgoing and the assessable income, in order to fall within the first limb of s 51(1), is that the outgoing is “incurred in gaining or producing” that income. The sub-section does not speak of outgoings incurred “in connection with” the derivation of assessable income or outgoings incurred “for the purpose of” deriving assessable income. It has long been established that “incurred in gaining or producing” is to be understood as meaning incurred “in the course of” gaining or producing. What is meant by being incurred “in the course of” gaining or producing income was amplified in Ronpibon Tin NL and Tongkah Compound NL v Federal Commissioner of Taxation where it was said that:
“to come within the initial part of [s 51(1)] it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income”.
(Footnotes omitted. My emphasis.)
The High Court continued, at [11] to explain:
Accepting, as one must, that “the assessable income” referred to in s 51(1) is a broad concept, it may well follow, as the majority of the Full Court said, that “[t]he relevance of the expenditure should be determined having regard to the overall income producing activities of the taxpayer, and not by reference to individual sources of income”. That is not to say, however, that the kind of connection which s 51(1) requires between outgoing and income is other than the connection described as “incurred in gaining or producing the assessable income”. The question is whether the outgoing was incurred in the course of gaining or producing actual or expected income. That is, is the occasion of the outgoing found in whatever is productive of actual or expected income?
(Footnotes omitted. My emphasis.)
Thus, the expense needs to be incurred by the taxpayer to produce their income.
Payne has been applied in subsequent cases, including by the Full Court of the Federal Court in Clough Limited v Commissioner of Taxation [2021] FCAFC 197 (Clough). Thawley J, with whom Kenny and Davies JJ agreed, cited Payne with approval. Thawley J explained that the facts and circumstances of the individual case will be relevant to consider and the reason for the outgoing should be viewed from a practical or business point of view [50]:
The “occasion of the loss or outgoing” (being the language in Ronpibon extracted immediately above) is to be found after an examination of all relevant circumstances giving rise to the outgoing. As with the process of characterisation necessary to determine whether an outgoing is on capital or revenue account, it is relevant to ask what the outgoing is calculated to effect from a practical or business point of view: Trustees of the Estate Mortgage Fighting Fund Trust v Commissioner of Taxation [2000] FCA 981; (2000) 102 FCR 15 at [19] (Hill J), referring to Hallstroms Pty Ltd v Federal Commissioner of Taxation [1946] HCA 34; (1946) 72 CLR 634 at 648.
(My emphasis.)
In Commissioner of Taxation v Day [2008] HCA 53, at [30], the High Court considered when an outgoing will be deductable in the context of s 8-1(1)(a) of the ITAA 1997. In a joint judgment, Gummow, Hayne, Heydon and Kiefel JJ explained, at [30]:
Section 8-1(1)(a) is couched in terms intended to cover any number of factual and legal situations in which expenditure is incurred by a taxpayer. Its language and breadth of application do not make possible a formula capable of application to the circumstances of each case. Cases are helpful to show the connection found on the facts there present, but not always to explain how the search for the requisite connection is to be undertaken. Payne directs attention to the statement made in Ronpibon Tin, as to the question posed by a provision such as s 8-1(1)(a), as correct and appropriate to be applied. The question, as restated in Payne, is: “is the occasion of the outgoing found in whatever is productive of actual or expected income?” That inquiry will provide a surer guide to ascertaining whether a loss or expenditure has been “incurred in [the course of] gaining or producing ... assessable income”.
(Footnotes omitted. My emphasis.)
In Commissioner of Taxation v Firth (Firth) [2002] FCA 413, Hill J explained, at [5]-[6]:
S8-1, which is in similar terms to that of its predecessor, s 51(1) of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act") is necessarily expressed in language of generality, for it provides for the deduction of the large variety of losses or outgoings which may be described compendiously as normal working outgoings or normal business expenses: Federal Commissioner of Taxation v Riverside Road Pty Ltd [1990] FCA 205; (1990) 23 FCR 305 at 311. It is expressed relevantly in two subsections, the first of which may be referred to as involving the positive tests of deductibility and the second the negative tests excluding a loss or outgoing from being deductible.
The positive tests require that there be a connection between the loss or outgoing on the one hand and the assessable income or business on the other. The nature of that connection has been expressed in different ways in the cases. It is sometimes said that there must be a "perceived connection" between the loss or outgoing and the assessable income or business: Federal Commissioner of Taxation v Hatchett [1971] HCA 47; (1971) 125 CLR 494 at 499. In other cases it has been said that the expenditure must be “incidental and relevant” to the operations or activities regularly carried on by the taxpayer for the production of income: Ronpibon Tin NL v Federal Commissioner of Taxation [1949] HCA 15; (1949) 78 CLR 47 at 56, Federal Commissioner of Taxation v Smith [1981] HCA 10; (1981) 147 CLR 578 at 586. These ways of describing the connection that is a necessary prerequisite to deductibility are but part of the process of identifying the essential character of the expenditure in order to determine whether a particular loss or outgoing is in fact incurred in gaining or producing the assessable income or in carrying on a business which more directly contributes to the gaining or production of the assessable income: Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 at 499.
(My emphasis.)
In Anders and Commissioner of Taxation [2023] AATA 1471, at [33], Member D Mitchell quoted a succinct and accurate summary of the authorities that deal with the deductibility of work-related self-education expenses. I have quoted from this summary in the following three paragraphs numbered (a) to (c), omitting the footnotes, replacing them with the relevant citations for ease of reference.
Self-education expenses may be deductible if they are essential for a taxpayer to maintain their income earning activities, or to improve the taxpayer’s skills or knowledge necessary to perform their current role:
(a) A deduction is allowable for self-education expenses if the taxpayer’s 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 (maintain or improve the skill or knowledge test). [Federal Commissioner of Taxation v Finn [1961] HCA 61; (1961) 106 CLR 60 (Finn); Commissioner of Taxation v Studdert [1991] FCA 593; (1991) 33 FCR 75.]
Alternately, if the self-education undertaken by the taxpayer leads to an increase in income in their current income earning activities, the expense may be deductible:
(b) A deduction is allowable for self-education expenses if the subject of self-education leads to, or is likely to lead to, an increase in the taxpayer’s income from current income-earning activities (increase in income from current income-earning activities test). [Federal Commissioner of Taxation v Hatchett [1971] HCA 47; (1971) 125 CLR 494; Commissioner of Taxation v Smith (1978) 36 FLR 95.]
However, self-education to obtain new employment or a new income earning activity lacks the sufficient nexus to be deductible:
(c) The fact that a study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer’s current employment) is not a sufficient basis in itself for self-education expenses to be deductible …[Federal Commissioner of Taxation v Maddalena (1971) 2 ATR 541 (Maddalena); Federal Commissioner of Taxation v Roberts (1992) 39 FCR 118; Federal Commissioner of Taxation v Kropp (1976) 6 ATR 655.]
A general connection between the subject matter of the expense and the subject matter of the taxpayer’s employment will not be sufficient. There are specific, and somewhat narrow, tests that need to be satisfied (that is, the maintain or improve the skill or knowledge test or the increase in income from current income-earning activities test) to establish that the expense was necessarily incurred by the taxpayer to produce their income.
Tax Ruling
These principles are succinctly summarised in Taxation Ruling 98/9 – Income Tax: deductibility of self-education expenses incurred by an employee or a person in business (Tax Ruling). The Tax Ruling was withdrawn with effect from 27 September 2023, but it was applicable during the Relevant Income Years.
Paragraphs [12]-[16] of the Tax Ruling provide the following overview:
12.Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer’s current income-earning activities.
13.If a taxpayer’s 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, the self-education expenses are allowable as a deduction.
14.If 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 his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.
15.The fact that the study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment) is not a sufficient basis in itself for self-education expenses to be deductible. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
16.In practice, the above principles do not always operate on a mutually exclusive basis. It is always necessary to have regard to the words of section 8-1 and apply them to the facts.
Further, para [17] of the Tax Ruling explains:
An expense is deductible under section 8-1 when it has the essential character of an income-producing expense. The essential character is to be determined by an objective analysis of all the surrounding circumstances.
Paragraph [42] of the Tax Ruling explains if that if the connection between the self-education expense and a person’s income-earning activity is too general, the deduction will generally not be allowed:
If a course of study is too general in terms of the taxpayer’s current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances ...
THE ISSUE
The issue that I must determine is whether the following expenses are deductable pursuant to s 8-1(1)(a) of the ITAA 1997:
(a)The expenses for the General Dentistry Initial Assessment and Written and Practical Examinations; and
(b)The associated expenses for meals, accommodation, and flights.
This involves a consideration of whether there is a sufficient nexus between the expenses incurred and the Applicant’s income earning activity as a dental technician.
As I have explained with respect to the legislative framework above, there will be such a connection if:
· The self-education undertaken by the Applicant was necessary to maintain her income earning activities as a dental technician.
· The self-education improved her skills or knowledge necessary to perform her role as a dental technician.
· The self-education led to an increase in income in her role as a dental technician.
A further issue raised by the Respondent was whether the expenses were otherwise not deductible pursuant to s 8-1(2) of the ITAA 1997 because they are “capital, or of a capital nature”. If I find that the Applicant is unable to claim the deductions under s 8-1(1) of the ITAA 1997 it will be unnecessary for me to consider this issue.
Pursuant to s 14ZZK of the Taxation Administration Act 1953 (Cth) (TAA), the Applicant has the burden of proving that the assessments for the Relevant Income Years are excessive or otherwise incorrect, and if so, what they should have been. In short, the Applicant has the burden of proving that she was entitled to the deductions.
SUBMISSIONS
The Applicant’s submissions
The Applicant submitted that there is a “strong nexus” between the expenditure and her assessable income.
She submitted “that the duties of a dentist & a dental technician are symbiotic – not only are they similar but they go hand in glove”.
In a witness statement dated 18 October 2022, the Applicant stated:
When I arrived in Australia I wasn’t allowed to practice as a Dentist & I had to sit for Australian dental examinations
Which were substantially the same as Romania but now in English.
Sitting for the Australian exams required a lot of study which I believe is technically described as “self education”.
Completing this additional self-education took several years & until my studies were completed I worked as a dental technician.
The skills of a dental technician are very similar to a dentist & the additional study definitely helped in performing my duties as a dental technician.
It allowed me to carry out my duties more efficiently, with more knowledge than any of my colleagues.
I have now passed all the exams with the Australian Dental Council and I am able to practice as a dentist …
She contended that the self-education expenses enabled her to maintain or improve her specific skill or knowledge in relation to her income earning activities. In support of this submission the Applicant referred to a letter from her employer. The relevant parts of the letter stated:
Alice started to work for our company on 13 November 2013 with a salary of $1,382.00 fortnightly as a dental technician having the responsibility of fabricating crowns and bridges from different materials, like precious and non-precious metals, zirconia, Emax, and ceramic. Glazing, staining, and finishing all product to a very high quality standard.
We knew from day one that she was also a qualified Dentist in her country of origin and could not practice in Australia due to different legislation. However, she was willing to go through new examinations and training while working at our laboratory.
In all these years, while she was working for us and studying for her exams, Alice improved tremendously, her knowledge and skills developed rapidly, while her confidence and effective communication strongly improved, making her one of the most skilled technicians in my laboratory, reflecting in her salary being increased over a period of 10 years, earning $2,460.00 fortnightly.
In that time, Alice’s pay increases outpaced inflation.
Due to this amazing and unique rare combination of study/skills, Alice was able to have a complete understanding of dentistry, from both perspectives as a dental technician and as a dentist too. This makes Alice an asset for any employer & most definitely for her patients & the community at large.
Subsequently, both dentists & patients hugely benefit from all of Alice’s training & skills which have intertwined over the years, complementing each other, therefore increasing Alice’s knowledge & earning capacity. …
More specifically, the Applicant contended that her situation was like that of the taxpayer in Commissioner of Taxation v Studdert (1991) 33 FCR 75 (Studdert). She argued that like the taxpayer in Studdert improving his skills as a flight engineer through undertaking flying lessons, the expenses she incurred in completing her dental examinations have improved her skills in her role as a dental technician.
By way of summary, Studdert was an unsuccessful appeal by the Commissioner from a decision of this Tribunal. The Tribunal found that the taxpayer, a flight engineer for Qantas on Boeing 747 passenger transport aeroplanes, could claim the cost of flying lessons because they improved his capacity as a flight engineer. Hill J, at 76, explained the role of a flight engineer:
Such planes [Boeing 747 passenger planes] carry a flight engineer to supervise and regulate the delivery of power to the aeroplane from the jet engines. To carry out this function the flight engineer sits directly behind the first officer, who in turn sits next to the captain with direct access to four levers which control the thrust of the four jet engines of the aeroplane. The major instruments and controls are directly accessible by the captain and first officer.
The Tribunal found that the flying lessons were deductible because “his flying lessons improved his proficiency as a flight engineer” (at 77). The Tribunal reasoned, at 76:
I accept the applicant’s evidence on this point. Having regard to the close consultation needed between the officers and engineer in bringing these complex machines with their passengers in safety from one place to another, and the desirability of the engineer understanding not only the mechanism of power delivery, but also the intricacies of take-off and landing of these aeroplanes, it seems to me to be a matter of commonsense that the engineer understands not only his own duties as to delivery of power, but also the interrelated combination of factors relating to the duties of the pilot which lead to the successful take-off and landing of the flying machines of Australia’s international carrier.
As was referred to in the excerpt from the letter from the Applicant’s employer set out above, the Applicant also submitted that the additional knowledge she gained in her studies as a dental technician resulted in increases in her income totalling 60% over six years at an average of 19% per annum, which was well above the rate of inflation.
The Respondent’s submissions
The Respondent submitted that the evidence does not sufficiently establish the requisite connection between the Applicant’s income earning activities and the self-education expenses, and consequently, that the expenses were not deductible under s 8-1(1)(a) of the ITAA 1997. That is, the Respondent submitted that the evidence does not sufficiently establish the expenses incurred by the Applicant were productive of her assessable income.
The Respondent’s submissions, and relevant observations about the evidence, can be summarised as follows:
·The Applicant’s employer did not require her to undertake the assessments or examinations as part of her dental technician role, nor was there any regulatory requirement that she do so for her role as a dental technician. There was no such requirement in her employment contract or job description, and she obtained her employment prior to undertaking the initial assessment and remained employed in the absence of completing all the assessments and examinations.
·Contrary to the Applicant’s submission, the roles are not closely aligned. A dentist works on live patients whereas a dental technician works on inanimate teeth.
·The evidence does not demonstrate how the assessment, written examinations, or practical examinations had the effect of maintaining or improving the Applicant’s skills as a dental technician.
·The expenses claimed are not in fact related to any tuition or study, rather, they are fees paid to sit an assessment and examinations required to be passed before a person can apply for registration as a dentist in Australia. In that regard they were “calculated to effect” her registration as a dentist in Australia (Clough).
·The assessment and examinations relate exclusively to becoming eligible for registration as a dentist in Australia, and therefore the expenses were incurred at a point too soon to be regarded as incurred in gaining or producing the Applicant’s assessable income (Maddalena at [427]; see also Ting and Commissioner of Taxation [2015] AATA 166 at [35]).
·The “essential character” (Firth) of the expenses was to obtain employment as a dentist rather than as a dental technician.
With respect to the pay rises that the Applicant received, the Respondent contended that the Applicant has not provided sufficient evidence to show the increase in salary was a result of sitting the assessment or the examinations.
With these submissions in mind, I will now assess the relevant tests in the context of the circumstances of the Applicant’s case.
MAINTAIN OR IMPROVE SKILL OR KNOWLEDGE TEST
If the assessment and examination expenses undertaken by the Applicant maintained or improved her skills or knowledge necessary to perform her role as a dental technician, the expenses will be deductable.
Maintain skills
The evidence does not support a finding that the assessment or the examinations were required to maintain the Applicant’s skills as a dental technician. She was already a qualified dentist overseas. Her employment contract did not require her to undertake any study to maintain her skills, nor did any professional body.
I find that the assessments and examinations (and any associated study) were not required to maintain the Applicant’s skills and/ or knowledge.
Improve Skill of Knowledge
The evidence before me does not suggest a sufficient correlation between the assessments and examinations and the improvement of the Applicant’s role as a dental technician.
The letter from the Applicant’s employer suggests that the quality of the Applicant’s work was excellent and that she “improved tremendously” throughout her employment.
The Applicant also said in her witness statement that the additional study helped her in performing her duties as a dental technician and helped her to be more efficient.
However, I agree with the Respondent’s submission that it is not clear how the assessment, written examinations, or practical examinations had the effect of maintaining or improving the Applicant’s skills as a dental technician. The evidence is in the form of general assertions, and it is not clear how sitting examinations to certify suitability for registration as a dentist in Australia improved the Applicant’s skills as a dental technician.
I also note that whilst the industry is the same for both roles, the roles do appear to be different. Dentist career information, when contrasted with Dental Technician career information, from the Australian Dental Association (ADA) New South Wales Website suggests that the roles are different. For example, the role of a dentist is patient centred focus in treating, educating and advising patients about their oral hygiene and health and includes performing procedures under anaesthetic, prescribing medications and referring patients to specialists.
In contrast, the role of a dental technician does not involve any patient contact, but rather involves working in a laboratory and includes receiving orders from a dental prosthetist or dentist to, for example, make plaster and stone models, impression trays, construct ceramic restorations, refine and repair dentures and the like.
The qualifications for each role are also different. The minimum qualification for a dental technician is a two-year diploma of dental technology, whereas a dentist has to complete a bachelors degree comprising at least four years of full time study. Unlike dentists, dental technicians are also not required to be registered with the DBA.
I agree with the Respondent’s submission that the Applicant’s situation is different to that of the taxpayer in Studdert. In that case there was “uncontradicted evidence … that his flying lessons improved his proficiency as a flight engineer” (at [9]). However, in the Applicant’s case is not clear what skills and knowledge were gained from sitting the assessment and the examinations and how that would correlate with the Applicant’s role as a dental technician, given the differences in those roles that I have just outlined. In this regard, the Applicant’s situation can be distinguished from the taxpayer’s situation in Studdert.
The evidence suggests that the purpose of the assessment and examinations was to be certified as competent to practise as a dentist in Australia. Information from the ADA web page titled, “International Dentists” explains that if a person is registered to practice as a dentist overseas, the ADC will assess their qualifications to determine whether the person meets the criteria for immediate registration. If not, they may be required to complete a written and practical examination.
Thus, the expenses for the assessment and examinations were not related to any tuition or study, but rather they were “calculated to effect” the Applicant’s registration as a dentist in Australia (Clough). In other words, the “essential character” (Firth) of the expenses was to obtain registration as a dentist. Indeed, the expenses can be categorised as exclusively relating to eligibility to practice as a dentist in Australia. As the Applicant was not yet employed as a dentist during the Relevant Income Years but sought to become registered as a dentist to work as a dentist in the future, the expenses were incurred at a point too soon to be regarded as incurred in gaining or producing the Applicant’s assessable income (Maddalena).
INCREASE IN INCOME TEST
If the self-education undertaken by the Applicant led to an increase in her income in her role as a dental technician, then the expenses will be deductable.
The letter from the Applicant’s employer which I extracted above referred to the Applicant’s “salary being increased over a period of 10 years”. However, it does not specifically state that her pay increases were due to her completion of the assessment and the examinations. Her salary increase may have been due to several factors including the experience and confidence she gained over the 10 year period she was working with her employer. That is what my reading of the letter from her employer suggests. Whether or not the Applicant’s pay increases exceeded inflation does not assist in determining whether her study led to those increases.
That conclusion is further supported by the timing of the Applicant’s pay increases which do not correlate with the timing of the assessment and examinations. The Applicant’s wage increases were as follows:
·Her first wage increase was on 28 November 2013 which was in the first month of her employment. The Applicant’s wage was increased from $52,000 to $66,040. This was seven months prior to the initial assessment.
·The second wage increase was on 28 April 2016. The Applicant’s wage was increased from $66,040 to $67,360. That was 11 months after the first written examination.
·The Applicant’s third wage increase was on 24 November 2016. Her wage was increased from $67,360 to $72,800. That increase was near the examination, being seven days after the second examination.
·The Applicant’s fourth wage increase was on 14 February 2019, when her wage was increased from $72,800 to $83,200, more than eight months after the third written examination.
The overall timing and pattern of wage increases seems to have no discernible correlation to the Applicant’s completion of her assessment and examinations.
In summary, I am therefore not satisfied that the assessment and examinations (or any associated study for that matter) undertaken by the Applicant led to the increases in her income in her role as a dental technician.
CONCLUSION
For the reasons outlined above, and based on the evidence before me, there is an insufficient connection between the Applicant’s expenses incurred in completing her examinations and practical assessments, and her income earning activity as a dental technician. This means that the expenses are not deductable under s 8-1(1)(a) of the ITAA 1997, and it follows that the related expenses of meals, accommodation and flights are also not deductible.
It is therefore unnecessary for me to consider whether the expenses are “capital, or of a capital nature” which would exclude them from being deductable due to the operation of s 8-1(2) of the ITAA 1997.
In other words, the Applicant has not met the burden, pursuant to s 14ZZK of the TAA, of proving that the assessments for the Relevant Income Years are excessive or incorrect and otherwise what they should have been.
DECISION
The Reviewable Decisions in applications 2022/0202, 2022/0203, 2022/0204 and 2022/0205 are affirmed.
I certify that the preceding 67 (sixty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner
...............[Sgd].............................................
Associate
Dated: 19 April 2024
Date of hearing: 12 December 2023 Representative for the Applicant: Mr D O’Brien, O’Brien Accountants Representative for the Respondent: Mr S Majteles, instructed by Ms D Wong of the Australian Taxation Office
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