Edited version of private ruling

Authorisation Number: 1011730473036

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Ruling

Subject: Self-education expenses

Question

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

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2010

Year ending 30 June 2011

The scheme commences on:

1 January 2010

Relevant facts and circumstances

You were working casually in a company.

On the particular date you stopped working but remained on call.

You commenced a course in a particular field.

You ceased working due to study and family commitments.

The idea to commence study was your own and you were not encouraged by your employer to study.

You completed the course so that you could have the chance to obtain a higher paying position in the company, as project manager.

You were told by your manager that you would be able to return to work during study holidays.

You incurred expenses related to textbooks and course fees.

The fees were not paid using the Higher Education Loan Program.

You were not reimbursed for the expenses incurred in relation to your study.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

Your expenses for self-education are not deductible as there isn't a sufficient connection to your income-earning activities and they are viewed as being incurred for the purposes of gaining employment or to obtain new employment.

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, or relate to the earning of exempt income.

Taxation Ruling TR 98/9, which deals with the deductibility of self education expenses, states at paragraphs 12 and 13:

Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer's current income-earning activities.

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, the self-education expenses are allowable as a deduction.

However, paragraph 15 of TR 98/9 states that no deduction is allowable for self-education expenses:

...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. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Paragraph 48 of TR 98/9 states:

The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Paragraphs 53 and 54 of TR 98/9 provide the following example:

After finishing her final year of school, Sarah enrols in a full-time fashion photography course at a technical college. She is supported by her parents during her studies and does not receive any government assistance, but does some casual sales work on weekends.

Sarah cannot claim the costs associated with the course against her casual work income because her study costs were incurred at a point too soon to be regarded as incurred in gaining or producing income from her future employment in the fashion photography industry.

In your case you were employed casually when commencing your course and ceased working a few weeks into your studies. In your circumstances it is regarded that your expenses for self-education lack the sufficient connection to your income-earning activities. Additionally, your self-education expenses are viewed as being incurred for the purposes of gaining employment or to obtain new employment.

Therefore, you are not entitled to a deduction for the expenses you incurred in undertaking your self-education.