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Ruling

Subject: Self-education expenses

Question 1

Are you entitled to a deduction for self-education expenses against the education payment income for the 2009-10 and 2010-11 financial years?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

During the 2009-10 and 2010-11 financial years, you undertook a course of study.

You were at the place of education from early 2010 studying full-time and you completed the course in early 2011.

Completion of the course, gives you a qualification to undertake a certain activity.

During part of the time you were at the place of education, you were in receipt of education payments. You stopped receiving the education payments before completion of your study because you had reached the maximum period for which you could receive the education payments.

You advised the amounts that you received in each financial year. You declared these amounts in your tax returns for each year.

An amendment for the 2009-10 financial year has been processed to allow you a deduction for some of your self-education expenses. You did not claim a deduction for self-education expenses in your 2010-11 tax return.

You provided details of the expenses incurred by you.

You provided documentation relating to these expenses.

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) states that,

8-1(1) You can deduct from your assessable income any loss or outgoing to the extent that:

· it is incurred in gaining or producing your assessable income; or

· it is necessarily incurred in carrying on a business for the purposes of gaining or producing your assessable income.

Each of the above requirements is referred to as a positive limb of section 8-1 of the ITAA 1997. The High Court, in Commissioner of Taxation v. Symone Anstis [2010] HCA 40;ATC 20-221; 76 ATR 735 (Anstis case), confirmed that the expenditure satisfied the 1^st positive limb of section 8-1 of the ITAA 1997 (that is, incurred in gaining or producing assessable income). The High Court provided the following in their reasoning (at paragraph 29) for treating the study expenses as deductible under the 1^st positive limb:

It may be said that the income was assessable not by reason of any personal exertion or exploitation of property on the part of the respondent. However, contrary to the submission by the Commissioner, that does not inexorably lead to a conclusion that there may be no deductions of any kind allowed under s 8-1 of the 1997 Act. The notion of "gaining or producing" income within the meaning of s 8-1(1)(a) is wider than those activities which may be said to earn income. According to its ordinary meaning, to "gain" means not only to "earn or obtain (a living)" but to "obtain, secure or acquire" or to "receive". Similarly, the ordinary meaning of the verb "produce" is to "bring (a thing) into existence" and is not limited to bringing something into existence by mental or physical labour.

And further at paragraph 30,

Rather, as Ryan J said, the assessable youth allowance income received by the respondent was gained or produced by her entitlement to that payment consequent on the determination by the Secretary that she qualified for the payment. That statutory right to payment would be retained by her, without reduction, non-payment, suspension or cancellation, so long as she maintained her qualification for the payment by satisfying the activity test by undertaking full-time study so defined.

Also at paragraph 34,

Those outgoings were deductible by reason of their being incurred in the course of her retention of a statutory right to payment.

In your case, you received educational payments in the 2009-10 and 2010-11 financial years for a period. Given the High Court's decision in the Anstis case, you are entitled to a deduction under section 8-1 of the ITTA 1997 for study expenses you incurred during that period in order to retain your entitlement to the education payments.

You had previously undertaken study for which you received education payments. Due to limitations set on how long a student can receive the education payments, you had no further entitlement to the payment of the education payments after a certain date. You were not in receipt of the education payments after that period and were not required to satisfy the activity test by undertaking full-time study. Therefore, any expenses incurred after that date were not incurred in satisfying the activity test for the receipt of the education payments.

Accordingly, you are only entitled to a deduction for the self-education expenses that you incurred during the period which you received the education payments. This excludes from the expenses listed in your application certain expenses, being costs invoiced and therefore 'incurred' after that date.