Edited version of your private ruling

Authorisation Number: 1012429635163

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a deduction for self-education expenses incurred in undertaking a Diploma?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You commenced employment as a manager in a specialised position.

You are responsible for the provision of expert knowledge by identifying and keeping abreast of changing legislation impacting the employer and co-ordinating awareness of regulatory change relevant throughout your team.

You have provided a copy of your role purpose statement that list the specific job and general skills required in your role.

Your job qualifications include a degree in business, banking and finance, commerce and law.

You had discussions with business leaders in sourcing a formal training course at your own expenses as there is no formal training in your role.

You undertook a Graduate Diploma.

You completed the course online and with on site activities.

The Graduate Diploma is designed for graduates for admission to the particular profession.

You understood that there was no requirement of your employer for you to be admitted to the particular profession.

The topics you undertook were directly relevant to your position in that they assisted you in maintaining and improving your skills in the general and specific skills required for your position.

You incurred course fees, associated study expenses such as internet, lighting and heating for study at home, travel for research, on site engagement expenses and stationery.

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 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.

Paragraphs 13 and 14 of Tax Ruling TR 98/9 provide that self education expenses will satisfy the requirements of section 8-1 of the ITAA 1997 if:

· a taxpayers 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; or

· 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 their current income-earning activities in the future.

Therefore, where 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, 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).

Taxation Ruling TR 98/9 provides the following example:

Desiree is a general medical practitioner in partnership with two other general practitioners in a large regional town. She undertakes further study in dermatology in order to set herself up independently as a specialist dermatologist. The expenses related to the study are not allowable as the study is designed to open up a new income-earning activity as a specialist.

In your case, you were performing duties as a manager in a specialised position. You are responsible for the provision of expert knowledge by identifying and keeping abreast of changing legislation and codes impacting the employer.

You undertook a Graduate Diploma, a specialised course designed to enable individuals to gain admittance as a qualified professional, developing the skills of people intending to become professionals.

You are not required to be admitted as a professional to complete your duties.

The Graduate Diploma is considered to be part of gaining your qualification as a professional.  The skills gained are not to enable you to undertake your current job.  Rather, they are a prerequisite to allowing you to practice as a professional.  As such, the expense is considered to be incurred at a point too soon to be regarded as incurred in gaining your assessable income.

Furthermore, your situation is similar to the example above and likewise, a deduction is not allowed.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).