Edited version of private ruling

Authorisation Number: 1011700079806

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Ruling

Subject: Self education expenses

Question

Are you entitled to claim a deduction for self education expenses?

Answer: No

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

· a private ruling application

· a letter of employment

· a copy of an employment agreement

· letters responding to requests for information from the Australian Taxation Office.

You are a health professional.

You have worked in the health section for a long time.

You have not undertaken any courses in relation to the course of study.

You resigned your position from your employer before commencing the course of study.

You have not worked in the profession related to your course of study.

You had undertaken a number of subjects as part of the course.

Your reasons for undertaking the course of study are:

· to enable you to assist specialists in the health sector

· to increase your income and promotion prospects with your employer

You commenced employment in a new occupation with a new employer after you completed the course of study.

You have received no allowances or been reimbursed for any costs in relation to course of study.

You had undertaken study during your own time.

Undertaking the course of study will not impact on your current pay level as a health professional.

Your employer did not encourage you to undertake the course of education.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Self education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature.

In accordance with TR 98/9, expenses of self education will satisfy the requirements of section 8-1 of the ITAA 1997 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, or

· 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.

In light of the two tests above, what needs to be fully considered is whether the undertaking the course of study:

· would contribute to the maintenance or enhancement of the skills and knowledge required in your employment or  

· would lead to an increase in salary from your current employment as a health professional.

You have provided a list of your duties and we consider that it is from these duties that you gain or produce your assessable income and that any outgoing or expenses incurred must directly relate to your duties.

In your case, you were not employed in the area of your course of study. While you may have some knowledge in regard to the new field of study, your duties with your employer did not require you to carry out any specific duties which related to the course of study.

The undertaking the course of study will provide you with specialised skills and abilities in advance of those that are required in your current employment.

The only other circumstance in which the costs would be deductible is if the qualification was likely to lead to an increase in your income from your current employment. In your case, there is no evidence that undertaking the course of study will lead to an increase in your current pay level as you have undertaken to take up new employment with a different employer.

Costs of self education are not deductible if the study is 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).This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (See paragraphs 15 and 48-62 of TR 98/9). The decision of the High Court in Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161 establishes the principle above.

In considering the Commissioner's view in regards to the principles in relation to the deductibility of self education expenses it is considered that there is insufficient nexus between your employment activities and the course of study as you do not meet the tests of deductibility as outlined above.

When viewed objectively the course of study is designed to enable you to obtain new employment in a different occupation. Consequently, you are not entitled to a deduction for self education expenses associated with the course of study under section 8-1 of the ITAA 1997.