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Ruling
Subject: Self education
Question
Are you entitled to a deduction for self education?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You were employed in the cosmetic industry.
You were paid an hourly rate and commission.
About 25% of your clients are from Country A.
You undertook two semesters of the language of Country A.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
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 discusses circumstances in which self education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the self education enables the taxpayer to maintain or improve that skill or knowledge, the self education expenses are allowable as a deduction.
The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 497 498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435).
Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384). Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case.
Although being able to speak the language of Country A may have been of some assistance in your general work, it is not a requirement to undertake your duties in the cosmetics industry. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties and the course.
Therefore, the self education expenses associated with the course are not incurred in earning your assessable income. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.