Edited version of private ruling

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Ruling

Subject: Self-education expenses

Questions and answers:

Are you entitled to claim a deduction for expenses you incurred in order to complete a university course?

Yes.

Are you entitled to claim a deduction for costs that would enable you to practice in your chosen profession?

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ending 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You commenced employment.

You later commenced the university course.

You incurred expenses for the course fees and accommodation expenses relating to the university course.

You completed the university course.

You enrolled in the course of your own accord as you felt it would increase your prospects of promotion at your current workplace.

You believe that the subjects you studied as part of the course were relevant to your employment.

Completing the course and being legally able to practice in your chosen profession was not a strict job requirement of your employment, however, you believe that it could improve your skills and would lead to being promoted more quickly.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

University expenses

Section 8-1 of the Income Tax Assessment Act 1997 (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.

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 current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

In your case you incurred self-education expenses in order to complete a university course. Your income-earning activities as an employee are directly related to your university course. There is a sufficient connection between the expenses incurred and the maintaining and improving of your skills and knowledge.

Therefore, you are entitled to a deduction for expenses you incurred in order to complete the university course.

Practice in chosen profession

As previously stated, 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.

You incurred an expense for costs that would enable you to practice in your chosen profession.

You have stated that being able to practice in your chosen profession is not a requirement of your employment. Therefore the expense you incurred does not relate to you earning assessable income as an employee in your current position.

Furthermore, Taxation Ruling TR 95/9 considers that expenses of the same nature as yours are not allowable deductions as they are capital in nature.

Therefore, you are not entitled to a deduction for costs that would enable you to practice in your chosen profession.

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