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Ruling

Subject: Self education expense

Question

Are you entitled to a deduction for self education expenses relating to your studies?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are currently a casual teacher employed on a day to day basis.

You completed your teaching and applied studies course. After completing this course you were proficient in metalwork, woodwork, graphics, computing and technology subjects. As a casual teacher you are required to teach all these subjects, as well as mathematics and religion.

Before working as a casual teacher you had not studied religion as a course. However you realised that there are more jobs available for teachers with religion studies on their teaching profile. Therefore you commenced your tertiary studies in religion which you completed in the 2010 financial year.

After completing your courses in the 2010 financial year, you have recently been employed on a casual day to day basis in a teaching position relating to the religious studies.

You are hoping to obtain full-time employment and you believe that these courses will help you in getting full-time work.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

It is considered that your primary purpose for studying was not to assist you in your casual work, but was to enable you to obtain qualifications that would allow you to secure full-time employment in the future as a religious teacher. Consequently you are not entitled to a deduction for the course fees incurred.

Detailed reasoning

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 the course of gaining or producing the assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.

Taxation Ruling TR 98/9 sets out the circumstances in which self-education expenses are allowable as deductions, and states that these expenses are deductible under section 8-1 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 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.

Self-education expenses are also allowable as a deduction if the study 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.

However, the ruling states that a deduction is not allowable for self-education expenses if the study is designed to enable a taxpayer to get employment, to obtain new employment, or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). The expenses come at a point in time too soon to be regarded as being incurred in gaining or producing assessable income.

In your case, you worked as a casual teacher while completing your religious studies, and completed the studies to enable you to gain full-time employment.

In Gupta v. FC of T 2002 ATC 2319; 2002 51 ATR 1205 (Guptas Case) the taxpayer was undertaking a Bachelors degree in Computer Science while he was employed on a casual basis as a demonstrator in the University's School of Computing and IT. The taxpayer claimed deductions for his self-education expenses on the basis that there was a direct connection between the expenses incurred and his maintaining or improving his skills necessary for the work at the university. The Commissioner of Taxation denied the claims on the basis that the expenses were incurred to enable him to gain his degree, and were not incurred in the process of earning his assessable income as a part-time employee. The taxpayer sought a review of this decision by the Administrative Appeals Tribunal (AAT). The AAT held that the self-education expenses were not deductible as the expenses were not incurred in gaining or producing the taxpayers' assessable income from casual work at the university and that the 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 casually as a teacher. It is considered that your self-education expenses were not incurred in the course of gaining or producing your income from casual employment and your course was undertaken in order to get future full-time employment.

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.