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Edited version of private ruling
Authorisation Number: 1011633430844
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Ruling
Subject: Self education expenses
Are you entitled to a deduction for self-education expenses incurred in relation to your studies in the 2009-10 financial year?
No.
This ruling applies for the following period:
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commences on:
1 July 2008
The scheme that is the subject of this ruling
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You graduated from an undergraduate degree in country A.
You commenced a full time university degree in Australia. The course commenced in 2008.
The course finished in 2009.
You earned no assessable income in the financial year that you incurred the expenses.
You commenced employment just prior to the end of the financial year but earned no income.
You were employed to do the type of work covered by the course.
Your fees were paid in the 2008-09 financial year. Purchase of textbooks occurred at the same time.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 8-1.
Reasons for decision
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; (1961) 8 AITR 406).
Similarly, 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, a deduction is allowable.
However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 and paragraphs 15, and 48 - 62 of TR 98/9).
In your case, at the time of commencement of your studies, you were unemployed. Therefore, at the time, your studies were not undertaken to maintain or improve an existing skill or knowledge used in your 'current' income earning activities. Nor can it be said that the subject of your studies will 'objectively lead to, or is likely to lead to' an increase in your income from your 'current' income-earning activities.
Your studies were undertaken in order to obtain new employment. The expenses associated with the degree course are therefore considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. The expenses are therefore not deductible under section 8-1 of the ITAA 1997.
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