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Edited version of your private ruling
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Ruling
Subject: Deduction-self-education expenses
Question:
Are you entitled to a deduction for self-education expenses?
Answer:
Yes.
This ruling applies for the following periods
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You commenced employment with a business.
You undertook a number of duties for your employer.
You entered into an agreement to provide for a period of unpaid leave.
Your reasons for undertaking a self-education course were to improve your skills in your current position.
You are required to complete a number of subjects.
Due to the results of the first semester you were offered a position with a new employer.
You commenced employment with a new employer early in a year.
You are currently completing the self-education course part-time as part of your employment arrangements with your new employer.
Your duties are similar to your previous employment.
You are undertaking the self-education courses at a place of education.
You resigned from your previous employment.
You did not receive any allowances or reimbursement for any expenses in relation to the self-education course.
You paid for your self-education expenses.
You have taken out a FEE- HELP loan to pay for course fees.
You will study in your own time.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 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 in which self education expenses are allowable as a deduction including where a taxpayer's current 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.
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.
In your case, you were on unpaid leave from your previous employment while undertaking the self-education course. The fact that a person is on unpaid leave from their employment does not sever the connection with their employment as they are still employed during that time. In Sykes v. Cleary (No.2) 1992 176 CLR 77 it was decided that an employee taxpayer on leave without pay continues to be an employee. There has been no break in employment due to you being on leave.
It is considered that a sufficient connection exists between your studies and your duties your previous employer. In the case of your employment with your current employer it is accepted that the self-education course will enhance the skills that are required in the performance of your employment activities with this employer.
Consequently, the self-education expenses incurred in undertaking the self-education course have the necessary and relevant connection with the earning of your assessable income. As there is the necessary connection between the course and your previous and current income-earning activities you are entitled to claim a deduction for your self-education expenses under section 8-1 of the ITAA 1997.
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