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Edited version of private ruling
Authorisation Number: 1011469667106
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Ruling
Subject: Self education expenses
Are you entitled to a deduction for the cost of the course which will be undertaken while you are carrying on a business in the same field?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You plan to commence a business in a certain industry.
You expect to operate this business for part of the working week.
You recently completed a course in the same field.
You plan to undertake another course in that field, concurrently while operating your business.
You will commence your business shortly and you will then commence the second course.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Summary
As you will have commenced your business at the time you undertake the second course, the expenditure is not considered to be incurred at a point too soon. The expenditure is regarded as having been incurred in gaining or producing assessable income and as such is an allowable deduction.
Detailed reasoning
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can deduct from your assessable income any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income, except where the loss or outgoing is of a capital, private or domestic nature.
Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses 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 (paragraph 13).
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 their current income earning activities in the future, a deduction is allowable (paragraph 14).
However, no deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment or to obtain new employment. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (paragraph 15).
In your case you plan to commence a business. Once your business has commenced, you will undertake a course in the same field while operating your business.
As you will be working in the business at the time you undertake the course, the expenditure is not considered to be incurred at a point too soon. The expenditure is regarded as being incurred in gaining or producing assessable income and as such is an allowable deduction.
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