Edited version of private ruling

Authorisation Number: 1011899469174

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Ruling

Subject: Self-education expenses

Question

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

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You were a part-time student undertaking a Bachelor degree. You incurred various expenses (i.e. Textbooks) in relation to this degree.

You were employed as a casual staff member for a 2 week period whilst studying.

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, or relate to the earning of exempt income.

Taxation Ruling TR 98/9 details the circumstances under which a deduction is allowable for self-education expenses. Self-education expenses are an allowable deduction if a taxpayer's income earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayers to maintain or improve upon that skill or knowledge (paragraph 13 of TR 98/9).

If the study 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 of TR 98/9).

However, 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 that relate 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.

In Gupta v FC of T 2002 ATC 2319; 2002 51 ATR 1205 (Gupta), the taxpayer was undertaking a Bachelor of Computer Science degree 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 claims were denied by the Commissioner of Taxation 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 casual employee.

A review of this decision was sought by the taxpayer through the Administrative Appeals Tribunal (AAT). The AAT held that the self-education expenses were not deductible as the expenses had not been incurred in gaining or producing the taxpayer's assessable income. The income from the casual work performed at the university was merely incidental to the studies. The expenses were incurred in getting future work and they came at a point too soon.

Your circumstances are similar to those in Gupta's Case in that you were studying while working casually. It is considered that your study is not to enable you to maintain or improve skills or knowledge in a profession you are already engaged in. It is instead to enable you to obtain qualifications that will allow you to secure full-time employment at a later date. Therefore, there is an insufficient connection to your income earning activities.

Your self-education expenses are incurred in order to get future work, and they are incurred at a point too soon. Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.