EDITED VERSION OF NOTICE OF PRIVATE RULING
Authorisation Number: 34345
This Ruling is a 'Private Ruling' for the purposes of Part IVAA of the Taxation Administration Act 1953.
YEAR(S) OF INCOME TO WHICH THIS RULING APPLIES:
Year ended 30 June 2003
TAX LAW:
Income Tax Assessment Act 1997 section 8-1.
Income Tax Assessment Act 1936 section 82A.
WHAT THIS RULING IS ABOUT:
Are you entitled to claim a deduction for your self education expenses?
THE SUBJECT OF THE RULING:
You are currently working in the audio industry.
You are responsible for handling queries on technical aspects of audio on certain equipment. Other duties include problem solving and assisting clients with the correct choice of products as well as rendering technical advice.
You are undertaking studies in Audio Engineering.
These studies were undertaken shortly after you accepted a job with your current employer.
COMMENCEMENT OF ARRANGEMENT:
1 July 2002
RULING:
Are you entitled to claim a deduction for your self education expenses?
Yes.
EXPLANATION: (This does not form part of the Notice of Private Ruling)
Section 8-1 of the Income Tax Assessment Act 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. 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 (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's 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 taxpayer's 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 (see Taxation, Commissioner of (Cth) v. Maddalena (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 - 62 of TR 98/9).
In your case, the course you are undertaking will enable you to enhance your technical skills, knowledge and understanding in your employment where you are required to have technical knowledge of the audio domain in relation to various products. The course also enables you to effectively provide advice on the correct choice of products and advise them on technical aspects in the area of professional and semi-professional work. The self education expenses are not incurred at a point too soon because at the time you decided to undertake the self education studies, you had already accepted employment with your current employer. Consequently, the self education expenses incurred in undertaking the course have the necessary and relevant connection with the earning of your assessable income to be deductible.
Note: 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 internet website at www.ato.gov.au or pages 50 to 51 of TaxPack 2002.
Disclaimer
The Register of Private Binding Advice is published as a public record of the binding advice issued by the ATO. Each piece of advice is based on a specific set of circumstances advised to the ATO and the law in force at the time of the advice, and is considered binding only in respect of the person/s or entity/ies on whose behalf the advice was sought. The Register is a historical record of advice provided, and is not updated to reflect changes in the law, withdrawal of advice or any other change in circumstance. Each piece of advice has been edited to avoid disclosing the identity of the person or entity on whose behalf advice was sought and published advice may therefore not disclose all the relevant facts or circumstances on which the advice was based. For these reasons, advice published in this Register cannot be relied upon as precedent for any other person or entity.