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Ruling
Subject: self education expenses
Question
Are you entitled to a deduction for 50% of the self education expenses incurred to undertake a course of study?
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 paid fees for a course of study.
The fee was a prepayment for an 18 month course.
You began working in your field of study in the following financial year.
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 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 (High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). 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 your case, you incurred expenditure to undertake a course of study prior to commencing employment with a company. This expense is considered to be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. The studies relate to a field of employment in which you were not engaged in when you incurred the expenditure. Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.