ATO Interpretative Decision

ATO ID 2005/69

Income Tax

Self education expenses: cancellation of enrolment of study
FOI status: may be released

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for fees that they incurred for the purpose of undertaking a subject in a course of study where they subsequently cancelled their enrolment?

Decision

Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for fees that they incurred for the purpose of undertaking a subject in a course of study, where they subsequently cancelled their enrolment.

Facts

The taxpayer enrolled to study a subject that formed part of a course of study during the income year.

The course of study had a relevant connection to the taxpayer's income-earning activities.

The taxpayer paid their fees but later cancelled their enrolment before commencing the subject course.

Due to the late cancellation of their enrolment, the taxpayer did not receive a refund of the fee they had paid at the time of their enrolment.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private, or domestic nature, or relate to the earning of exempt income.

Expenses associated with a course of study are normally deductible self education expenses under section 8-1 of the ITAA where they have a relevant connection to the taxpayer's income-earning activities.

In this case, the taxpayer's intention at the time of incurring the expense was to undertake a subject that was part of a course of study with a relevant connection to the taxpayer's income producing activities. The fact that the taxpayer subsequently cancelled their enrolment does not alter the fact that when the expenditure was incurred there was a relevant connection between the expense and the taxpayer's income-earning activities.

As such, the expenses were incurred in gaining or producing the taxpayer's assessable income and therefore satisfy the requirements of section 8-1 of the ITAA 1997.

Consequently, the taxpayer's expenses are deductible under section 8-1 of the ITAA 1997.

Date of decision: 19 November 2004

Year of income: Year ended 30 June 2005

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Keywords
Deductions & expenses
Self education expenses

Siebel/TDMS Reference Number: 4108858

Business Line: Small Business/Individual Taxpayers

Date of publication: 25 February 2005

ISSN: 1445-2782

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