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Edited version of your private ruling
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Ruling
Subject: Deduction - self-education expenses
Question 1
Are you entitled to a deduction for the expense incurred in the 2010-11 financial year which relates to your study activities in the 2011-12 financial year?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2011
Year ending 30 June 2012
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are a student and are in receipt of education payment income.
As part of your course, you are required to undertake one subject in a facility outside of the normal training facilities in the state where you reside.
You arranged to undertake this element of the study in early 2012.
You incurred expenses in the 2010-11 financial year relating to the intended 2012 study.
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. However, a deduction is not allowed where the outgoings are of a capital, private or domestic nature.
Your private ruling application refers to the High Court decision in Commissioner of Taxation v. Anstis (2010) HCA 40 (Anstis case). In the Anstis case, the High Court considered the deductibility of expenses incurred by the taxpayer in undertaking her study which was a requirement to her receiving the Youth Allowance. It was found that the reason for the taxpayer incurring the expenses was not determinative of the question whether they were incurred in gaining or producing the Youth Allowance. The occasion of her study expenses was to be found in what she did to establish and retain her statutory entitlement to the Youth Allowance. Expenses incurred included depreciation in value of a computer, textbooks and stationery, student administration fees, supplies for children during the taxpayer's teaching rounds and travel expenses other than to the university.
Expenses incurred for travel between the taxpayer's home and place of study was not considered in the Anstis case. Expenses of this nature are still considered to be of a private nature.
Your case can be likened to the Anstis case, in that you are currently a student at a university in receipt of education payments. As such, it can be said that the expenses in undertaking your medical studies are expenses incurred in order for you to retain your education payment income.
Therefore, we will now consider the expense that you incurred in the 2010-11 financial year for a study activity to be undertaken in the 2011-12 financial year.
Deduction
You have advised that you are required to partake in study in a facility outside of the state where you reside and to this end you have incurred expenses.
During the 2010-11 financial year, you were in receipt of education payments. Payment of the education payments to a student taxpayer is dependant on the taxpayer undertaking full-time study, known as the activity test, and satisfying this test with satisfactory progress in the course of education.
Generally, a deduction is allowed for an expense in the year the expense is incurred and section
8-1 of the ITAA 1997 does not require the deduction for the expense to be incurred in the year the activity or the derivation of assessable income relates to.
Undertaking the study in a facility outside the state where you reside is a requirement of your course and expenses incurred are expenses incurred in order to satisfy the requirements for the receipt of your education payment income. Therefore, you are entitled to a deduction for the expenses under section 8-1 of the ITAA 1997 in the year you incurred the expense (that is, the 2010-11 financial year).