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Ruling
Subject: Self education expenses
Question
Are you entitled to a deduction for self-education expenses related to completing your study?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2010
Year ended 30 June 2011
Year ending 30 June 2012
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are an Australian resident.
You were employed as a locum across various hospitals throughout Australia.
During this time spent as a locum, you undertook the usual roles that a locum would undertake in relation to patient care.
The scope of your role widened to include other work activities.
You decided that success in this role would be enhanced by completing further study.
You ceased working and enrolled in a course of further study.
During the course, you were registered in all Australian States and Territories. Your intention was to return to Australia as a medical professional.
You incurred significant expenses due to the requisite relocation to complete your study.
Upon completion of your further study you returned to Australia and started working.
Your additional abilities were instrumental in completing your work activities.
The expenses you wish to claim are directly associated with your further study including tuition fees, travel expenses and living expenses.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Section 8-1 of the 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 states self-education expenses are allowable as a deduction if your current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables you to maintain or improve that skill or knowledge.
However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. The leading case on this issue is Federal Commissioner of Taxation v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 (Maddalena). In that case, Barwick CJ states (ATC at 4162; ATR at 548):
The costs to an employee of obtaining his employment does not form an outgoing incurred in the course of earning the wages payable in the employment.
These include studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged.
In your case, you completed your study and then commenced employment. The expenses in carrying out your studies were incurred prior to earning assessable income. In fact, you were not employed while you were undertaking your study. Therefore, the expenses cannot be characterised as having been incurred in the course of earning your assessable income.
Applying the Maddalena principle above, the expenses of your study were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Consequently, the self-education expenses you have incurred are not allowable deductions.