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Edited version of private ruling
Authorisation Number: 1011659832699
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Ruling
Subject: Self education
Are you entitled to a deduction for self education expenses?
Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You are a professional.
Whilst you were unemployed, you received an offer of employment from which you accepted in late 2009 with a commencement date in early 2010.
As a condition of your employment, you were required to undertake a course.
You undertook the course during early 2010 and commenced later in 2010.
You were invoiced for the cost of the course in late 2009. You paid a deposit in late 2009 and the balance in late 2010.
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) states that you can deduct from your assessable income any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income, except where the loss or outgoing is 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 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 (paragraph 13).
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 their current income earning activities in the future, a deduction is allowable (paragraph 14).
However, no deduction is allowable for self education expenses if the study is to enable a taxpayer to get employment or to obtain new employment. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (paragraph 15).
Your employment contract commenced in 2009. Your training commenced in 2010.
You were employed at the time you incurred the expenses, therefore they were not incurred in obtaining new employment.
It is considered that your income-earning activities are based on the exercise of your skills and knowledge and the course enabled you to improve your skills and knowledge. Therefore, the expenses you incurred in undertaking the course are allowable under section 8-1 of the ITAA 1997.
Other Information
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 of how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on our website www.ato.gov.au