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Ruling
Subject: Work-related self-education expenses
Question 1
Are you entitled to claim work-related self education expenses in the 2011-12 financial year?
Answer
No
This ruling applies for the following period:
Year ending 30 June 2012
The scheme commences on:
1 July 2012
Relevant facts and circumstances
You obtained qualifications as a medical employee in an overseas country. You subsequently moved to Australia, and were required to undertake a course of education to have your qualifications recognised and allow you to work as a registered medical employee in Australia.
Upon completion of the course of education you obtained employmente.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature.
The Commissioner's view on the deductibility of self education expenses is contained in Taxation Ruling TR 98/9. These guidelines have been established through the views taken by the Courts, Boards of Review and Administrative Appeals Tribunals.
In accordance with paragraphs 13 and 14 of TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 if:
· a taxpayer's income earning activities are based on the exercise of a skill or some specific knowledge, and the course of self education enables the taxpayer to maintain or improve that skill or knowledge; or,
· the study of a course of self education objectively leads to, or is likely to lead to, an increase in a taxpayer's income from their current income earning activity in the future.
Therefore, provided there is sufficient connection between your course of self education and your current income earning activities, you are entitled to claim a deduction for your self education expenses.
However, as stated in paragraph 15 of TR 98/9, self education expenses will not be deductible if the study is intended to:
· enable you to get employment,
· enable you to obtain new employment, or
· to open up a new income-earning activity (whether in business or in your current employment).
This view is supported by the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 (Maddalena's case), which establishes the principle that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
In your case, you undertook a study course for the purpose of upgrading your existing qualifications. After completion of the course of education, you obtained employment in your specific profession. The course cannot therefore be said to have been undertaken to improve or maintain a specific skill or knowledge in a current income earning capacity, as you were not employed while undertaking your course of education. The essential character of the expenses is that they were incurred to enable you to complete the course of education and earn assessable income from your future employment in Australia in your specific profession.
The self education expenses are therefore considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income from this position. The decision in Maddalena's case applies to your circumstances as the studies have been undertaken in order for you to gain employment in Australia in your specific profession.
Accordingly, you cannot claim work related self-education expenses in the 2011-12 financial year.
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