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Ruling

Subject: 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 2011

Year ended 30 June 2012

The scheme commences on:

I July 2010

Relevant facts and circumstances

You are employed as a specialty manager.

You were declined a job to a new position that involved performing your current duties based on your lack of formal qualifications.

Your position involves both technical and business disciplines and as you have a background of the technical aspects you undertook a business related degree.

You enrolled in a university bachelor degree to gain qualifications and provide you with the skills you require to improve your skills in your current role.

You chose the subjects that were in line with your current income producing work:

You have provided an example how the course subjects have been instrumental in your understanding how you complete your tasks as you are responsible for the financial management of projects.

The course fees have been paid under FEE-HELP.

You received a salary increase to reflect the impending completion of the formal qualifications and as an incentive to finalise the degree and continue with other professional certifications.

You have provided a certified copy of your statement of attainment listing all of your completed courses with the majority of results achieving high distinction.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 82A.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings 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. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities.

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 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 taxpayers 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 (FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161).

In your case, it is accepted that the course you have undertaken will enhance the skills and knowledge that are required in the performance of your current employment duties.

Consequently, the self-education expenses incurred in undertaking this degree have the necessary and relevant connection with the earning of your assessable income.

Please note that the self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on the Tax Office's website at www.ato.gov.au.

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