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Edited version of your private ruling

Authorisation Number: 1012464444840

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self-education expenses?

Answer:

No

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are employed on a contractual basis.

Your employment details differ, depending on your contract.

You incurred various expenses related to the general maintenance of skills you sometimes use in your employment, depending on your contract.

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 or a provision of the taxation legislation excludes it.

Taxation Ruling TR 98/9 deals with the deductibility of self-education expenses.

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities.

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, the self-education expenses are allowable as a deduction.

In FC of T v Hatchett 71 ATC 4184, a teacher tried to claim a deduction for university fees. The teacher undertook the study in order to become a better teacher. In disallowing the deduction, Menzies J stated that:

This means that in order to be deductible, it is not enough that expenditure incurred will make you a better teacher or even that it is encouraged by your employer. The expenditure must be incurred in the course of earning your assessable income to be deductible.

A similar conclusion was reached in FC of T v White 75 ATC 4018. This case was concerned with the travelling expenses incurred by a clerk in the course of pursuing his accountancy studies at night. It was established that the clerk's accountant employers expected him to study and had he not done so, he could not have been expected to maintain his position in the firm. However, it was not a condition of his employment, that he, undertake studies. Nor was there any agreement that completion of the course would lead to any promotion or salary increase. In disallowing the expenses, Helsham J stated that:

On that reasoning Helsham J found that, although the taxpayer in White's case might have been enabled to better carry out his duties and be better fitted for promotion as a result of his pursuing the accountancy course, the expenses of that course were not sufficiently related to the gaining of his assessable income to be claimed as allowable deductions.

This was also the conclusion found in Case N4 81 ATC 32. A part time French teacher employed at a high school went on an overseas trip in which she spent 15 days in France. The teacher wished to claim the expenses incurred in France on the basis that she considered it necessary to update her linguistic skills, to hear and speak French in France and "to see and experience at first hand the areas and places, monuments, customs and so on, that I dealt with constantly in the class room".

The taxpayer admitted that superficially what she did during this period would have differed very little from the activities of a tourist who happened to be in France, but she added that in her case it was a learning situation, involving the gaining of skills she was going to use later.

In FC of T v. Finn (1961) 106 CLR 60 at 70; (1961) 12 ATD 348 at 352 (Finn's Case), Windeyer J stated:

If a course of study, is too general in terms of the taxpayers current income earning activities, the necessary connection between the self-education expense and the income earning activity does not exist.

In disallowing the claim the court distinguished her circumstances from the facts in Finn's case. Although, the travel should make her a better teacher, the expenditure was not incurred in the course of earning her assessable income. She was not requested to travel to France (as in Finn's case), her employer did not make any contributions towards the trip (as in Finn's case) and most importantly, she would not be promoted as a result of the trip (as in Finn's case). Promotion did not form a substantial motive for the travel as it did in Finn's case.

In your case, it is considered that the link between the expenses you incur and the earning of your assessable income is too general in nature.


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