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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 2013
The scheme commenced on
1 July 2012
Relevant facts
You are an international student enrolled in a Diploma course which commenced in early 2012.
In mid 2012, you commenced casual employment in a similar field.
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 the course of gaining or producing the assessable income, but are not allowable to the extent that they are of a capital, private or domestic nature.
Taxation Ruling TR 98/9 sets out the circumstances in which self education expenses are allowable as deductions, and states that these expenses are deductible where they have a relevant connection to the taxpayer's current income-earning activities.
A deduction is allowable for self education expenses if a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self education enables the taxpayer to maintain or improve that skill or knowledge.
Self education expenses are also allowable as a deduction if the study leads to, or is likely to lead to, an increase in a taxpayer's income from his or her current income- earning activities in the future.
However, the ruling states that a deduction is not allowable for self education expenses if the study is designed to enable a taxpayer to get employment, to obtain new employment, or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). The expenses come at a point in time too soon to be regarded as being incurred in gaining or producing assessable income.
In your case, you commenced the course in early 2012. In mid 2012 you commenced casual employment as an animal caretaker.
In Gupta v. FC of T 2002 ATC 2319; 2002 51 ATR 1205 (Gupta's Case) the taxpayer was undertaking a Bachelors degree in Computer Science while he was employed on a casual basis as a demonstrator in the University's School of Computing and IT. The taxpayer claimed deductions for his self education expenses on the basis that there was a direct connection between the expenses incurred and his maintaining or improving his skills necessary for the work at the university. The Commissioner of Taxation denied the claims on the basis that the expenses were incurred to enable him to gain his degree, and were not incurred in the process of earning his assessable income as a part-time employee. The taxpayer sought a review of this decision by the Administrative Appeals Tribunal (AAT). The AAT held that the self education expenses were not deductible as the expenses were not incurred in gaining or producing the taxpayer's assessable income from casual work at the university and that income was merely incidental to the studies. The expenses were incurred in getting future work, and they came at a point too soon.
Your circumstances are similar to those in Gupta's Case, in that you were studying while working casually. It is considered that your study is not to assist you in your casual work, but to enable you to obtain qualifications that would allow you to secure full-time employment in the future.
Consequently, your self education expenses are not deductible under section 8-1 of the ITAA 1997. The expenses were incurred at a point too soon.