Edited version of private ruling

Authorisation Number: 1011718547726

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Ruling

Subject: self-education expenses

Question

Are you entitled to self-education expenses relating to a your undergraduate degree course?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2009

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

The scheme commences on:

1 July 2008

Relevant facts and circumstances

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

· an employment contract as requested by the Australian Tax Office

· the course description for the course completed downloaded from the university website.

You are currently casually employed as a sales assistant in the retail industry working approximately 10 hours per week.

During the 2009 income year you were casually employed by numerous retail businesses and earned under $10,000.

During the 2010 income year you were casually employed by one retail business and earned approximately $15,000.

Your job description for that employer includes:

· visual merchandising - setting up window displays and shop layouts

· customer service - sales and enquiries

· merchandising the stock - selecting where the stock goes in the store

· opening and closing the store

· step-in manager - managing staff

In 2009 you commenced a Bachelor degree.

You incurred expenses relating to completion of the course.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

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 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 is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

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 (see FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 62 of TR 98/9).

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 taxpayer's assessable income from casual work at the university. The expenses were incurred at a point too soon to be properly regarded as incurred in gaining assessable income.

Your circumstances are similar to those in Gupta's Case, in that you were studying while working approximately 10 hours per week as a casual sales assistant in the retail industry. It is considered that your study is not to assist you in your casual work, but is to enable you to obtain qualifications that will allow you to secure full-time employment within the field of study.

It is considered that the Bachelor course will provide you with new skills and knowledge significantly in excess of those required as a retail sales assistant.

We consider that the self-education expenses were not incurred in the course of producing your assessable income. 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.