Edited version of private ruling

Authorisation Number: 1011473589475

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Ruling

Subject: self education expenses

Question

Can you claim a deduction for tuition fees?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are classed as an Australian resident for tax purposes.

You are currently in Australia on a student visa, studying at a training institute.

You work part-time and plan to follow on this career path when you finish your studies.

You work a number of hours per week on various duties as this is all you are allowed to work on a student visa.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are not entitled to a deduction for your self education expenses as they are incurred at a point too soon to be regarded as being incurred in producing or gaining your assessable income.

Detailed reasoning

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.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction for self-education expenses is allowable if a taxpayers current income-earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

However, paragraph 12 states that:

No deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayers current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income

The issue of self-education expenses and casual employment was considered in Gupta v. FC of T 2002 ATC 2319; (2002) 51 ATR 1205 (Gupta's Case). In that case the taxpayer commenced a Bachelor of Computer Science degree, and subsequently began casual work at the university's School of Computing and Information Technology as a computer laboratory assistant. After completing his course he remained in the employ of the university as a tutor and researcher. He submitted that there was a direct connection between his self-education expenses and maintaining or improving his skills necessary for the work at the university. Also, that there was a direct connection between the expenses and the higher rates of pay received during the course and subsequent to graduation, when he was appointed a tutor and researcher. His claims were denied on the basis that the expenses were incurred to enable him to gain his degree, not in the process of earning his assessable income as a part-time employee assisting students with their laboratory work.

The taxpayer sought a review of this decision, and it was held that his self-education expenses were not deductible. The Administrative Appeals Tribunal found that the essential character of the expenses was to qualify the taxpayer through obtaining his degree so that he could get ahead within the Information Technology industry to a more highly paid position. They accepted that his experience gave him the knowledge necessary for the casual university work, which was relatively low skilled and routine. They found that on completion of the degree, however, the taxpayer would have acquired more highly developed skills, qualifying him to undertake more responsible and demanding work than previously. It was held that the expenses were not incurred in gaining or producing the taxpayer's assessable income from casual work at the university; that income was merely incidental to the studies. The expenses were incurred in getting future work, and they came at a point too soon.

Your circumstances are similar to those in Gupta's Case, in that you were studying while working part-time performing support work. It is considered that your study was not to enable you to maintain or improve skill or knowledge in your part-time work, but was to enable you to obtain qualifications that would allow you to secure full-time employment in the future as a qualified professional.

Paragraph 57 of TR 98/9 gives an example of casual employment taken by university students during holiday periods. The example states:

Example: Shannon, who is undertaking a 4-year university degree in mining engineering, takes a job as a casual employee with a mining company during the end of year holiday period. It is the company's policy to take only students who are pursuing relevant studies. Shannon is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon.

If short term or casual employment is gained after the commencement of a course of education, expenses in relation to the course will not be deductible, even if the employment does have some connection with the course of self-education. In such circumstances, we consider that the requisite connection between the expenditure and the assessable income is absent.

We consider that your situation is similar to that covered by the example in paragraph 57 above, and as suggested earlier, comparable to Gupta's Case. Your self-education expenses were not incurred in the course of gaining or producing your income from part-time employment as an assistant and your course was undertaken in order to get future full-time employment as a professional.

Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997. The expenses were incurred at a point too soon.