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Ruling

Subject: Self-education expenses

Question and answer:

Are you entitled to a deduction for self-education expenses you incurred in undertaking and completing the Program?

No.

This ruling applies for the following period:

1 July 2009 to 30 June 2011.

The scheme commenced on:

1 July 2009.

Relevant facts and circumstances:

After obtaining a degree in Accounting from an Australian university and you undertook and completed the Program.

The Program is an initiative to help international students with an Australian accounting degree to get permanent residency status and employment in Australia.

The Program is recognised as a pathway for obtaining permanent residency under general skilled migration (GSM) and successful completion of the Program can attract additional points that can be applied towards meeting the GSM points test.

The topics covered by the Program were Australian business environment, culture, and workplace skills, achieving career success, and professional business communication. The Program also involved participating in an unpaid professional work placement.

During your participation in the Program you secured paid employment in an accounting role.

Prior to that, you were employed in a role completely unrelated to the accounting field.

You incurred course fees to participate in the Program.

You have not been reimbursed by any person or entity for any of the expenses you incurred while undergoing the Program.

You did not receive Austudy, ABSTUDY or Youth Allowance to assist with the cost of the Program.

You were not encouraged by any employer to participate in the Program.

Relevant legislative provisions:

Income tax Assessment Act 1997 Section 8-1.

Reasons for decision

Deductions for self-education

Taxation Ruling TR 98/9 - Income tax: deductibility of self-education expenses contains the Australian Taxation Office (ATO) view on when a deduction is allowed for a self-education expense.

Taxation Ruling TR 98/9 specifies that to be deductible, there must be a relevant connection between the self-education expense and the income earning activities the taxpayer is engaged in at the time the study is undertaken.

Where such a connection exists, self-education expenses can be characterised as having been incurred in gaining or producing the assessable income of the taxpayer and will be deductible under the general deduction provisions of section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

TR 98/9 notes that deductions for self-education expenses are generally allowable in cases where:

· the taxpayer's income earning activities at the time the study is undertaken 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, or

· the study of a subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayer's income from the income earning activities they are engaged in at the time of the study.

However, no deduction is allowable for self-education expenses if the purpose of the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income earning activity. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. In such cases, TR 98/9 notes that the expenses associated with the self-education are incurred at a point too soon to be regarded as having been incurred in gaining or producing assessable income. That is, there is no connection between the self-education expense and the income earning activities the taxpayer is engaged in.

TR 98/9 also notes that if a course of study is too general in terms of the income earning activities the taxpayer is engaged in at the time of the study, no deduction will be available for self-education expenses because the necessary connection between the expense and the taxpayer's income earning activities will not exist.

Application to your circumstances

You obtained a degree in Accounting and then undertook and completed the Program.

The Program is designed to help international students with an Australian accounting degree obtain employment in the accounting field and permanent residency in Australia.

Although you secured paid employment in an accounting role because of your participation in the Program you are not entitled to deductions for any self-education expenses you incurred because of your participation in the Program because:

Prior to obtaining paid employment in the accounting field you were working in a profession for which the skills and knowledge required had no connection with the Program, and from which you could not have expected an increase in your earnings because of your involvement in the Program. Accordingly, any expenses you incurred up the time you obtained paid employment in the accounting field are considered to have been incurred for the purpose of gaining employment in the accounting field and were incurred too soon to be deductible as self-education expenses.

Although you commenced earning income from a job in the accounting field before you completed the Program, we consider the topics covered by the Program (except perhaps for the work placement which was before any relevant assessable income was earned) are too general to reasonably argue any relevance to specific accounting related skills or knowledge. As such, it cannot be said that there was a relevant connection between any of the expenses incurred after the date you obtained employment in the accounting field and the income earning activities you were engaged in after that date.

Conclusion

You are not entitled to any deductions for any self-education expenses you incurred in relation to the Program.