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 ?

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).

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.