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Ruling

Subject: Self education expenses

Question and answer

Are you entitled to a deduction for the self education expenses you have incurred?

Yes

This ruling applies for the following period

1 July 2011 to 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You have been employed in law based roles since joining your employer.

You have been required to conduct legal research and analysis and provide technical advice to other areas of your office.

You have liaised with clients during the process of decision making and assessing litigation risks.

You have been responsible for preparing documents to be lodged with various courts and other legal institutions

You have drafted witness statements and attended and assisted with hearings.

You commenced and completed the Practical Legal Training Program in the 2012 financial year.

Upon completing all components of the Program, you are entitled to receive the Graduate Diploma of Legal Practice and seek admission as an Australian lawyer.

As part of the Program you have completed the following subjects:

· Civil Litigation

· Commercial and Corporate

· Property

· Professional Responsibility

· Professional Skills

· Trust and Office Accounting

· Administrative Law

· Consumer Law

The program consisted of a course component, work experience component and continuing professional development component.

The College of Law website states that the Program develops skills including:

· conducting legal analysis, research, reasoning and planning

· constructing and presenting persuasive arguments

· drafting legal documents, including court documents

· negotiating

· presenting clear, concise, accurate and useful legal advice, and

· managing risk.

In addition, the Program equips participants with the skills to:

· communicate effectively

· manage relationships

· apply court and tribunal procedures, and

· solve problems effectively.

The practical skills gained by doing the course, enable you to better perform your employment duties.

The practical skills gained by doing this course enabled you to better perform your duties.

You made full payment of the course fees, in 2011. These fees covered tuition costs and course materials, but did not include admission fees which are payable separately if you want to apply for admission.

In addition to course fees, you have incurred some minor expenses relating to stationery and depreciation of your personal computer.

You will not be reimbursed by your employer or anybody else for the expenses you incurred in relation to your study.

You were entitled to paid study leave while completing the program. This included weekly study leave, leave to attend assessments and leave to attend week-long intensives.

You undertook the course as part of your professional development opportunity and as part of your completion of your law degree.

You discussed the matter with your manager which appears in your performance development appraisal.

You do not intend to gain new employment nor practice law at this stage.

Relevant legislative provisions

Section 8-1 of the Income Tax Assessment Act 1997.

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.

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income-earning activities.

Taxation Ruling TR 98/9 discusses the circumstances in which self-education expenses are allowable as a deduction. Generally, 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 the self-education enables the taxpayer to maintain or improve that skill or knowledge in their current employment.

Similarly, if the study of a subject of self-education objectively 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, a deduction is allowable.

However, no deduction is allowable for self-educations expenses if the study is designed to enable a taxpayer to open up a new income-earning activity whether in business or in the taxpayer's 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.

In your case, you are employed and your income-earning activities are based on the exercise of a skill or some specific knowledge. The subject of the self-education expense will enable you to maintain or improve that skill or knowledge in your current employment. From the facts provided your self-education expenses have the relevant connection to your current income-earning activities. The self-education expenses are deductible under section 8-1 of the ITAA 1997