Edited version of private ruling

Authorisation Number: 1011675023485

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Ruling

Subject: self education expenses

Are you entitled to a deduction for the expenses you incurred in undertaking a course in real estate?

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You started casual employment doing property management duties.

You took one month off to complete an intensive course in real estate.

You incurred expenses in completing this course which included:

· introductory fee

· enrolment fee

· newspaper advertisement.

Your employer intended to employ you fulltime once you completed this course.

You completed the course and were employed fulltime as a real estate agent.

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, relate to the earning of exempt income or are precluded from deduction by another provision of this Act.

Taxation Ruling TR 98/9 states self-education expenses are allowable as a deduction if your current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables you to maintain or improve that skill or knowledge.

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. 

The issue of self-education expenses and casual employment was considered in Gupta v. FC of T 2002 ATC 2319; (2002) 51 ATR 1205 .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.

The Administrative Appeals Tribunal held 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 expenditure on self-education could not be considered to be maintaining or improving a skill you were using in deriving your income as a casual employee doing property management duties. Furthermore it could not be considered to have led to an increase in income from your casual employment duties.

In your circumstances, you could not sell real estate until you had successfully completed the one month intensive course. Consequently, you had completed your course of self-education prior to commencing your income earning activities of selling real estate. The object of your self-education was to get employment selling real estate and open up a new income earning activity. Your expenditure was incurred at a point too soon.

Therefore, no deduction is allowable for the expenses incurred in undertaking the course in real estate.