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Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for your course fees, subscriptions, parking fees and travel expenses incurred prior to commencing employment?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

Prior to taking a voluntary redundancy you were engaged in a career transition program.

You decided to commence study in Area X.

You obtained exposure to the Area X industry by attending work experience programs. The programs were unpaid.

You enrolled in a relevant course and paid fees.

After enrolling you commenced casual employment with Organisation Y.

Your course commenced the following financial year.

You also incurred additional expenses such as subscriptions, parking and travel.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current 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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

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-education expenses if the study is designed to enable a taxpayer to get employment, to obtain new employment or 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 (Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, 48 and 62 of TR 98/9).

In your case, you were not employed in a paid position in the Area X at the time of incurring the course fees. Therefore, these expenses cannot be characterised as having been incurred in the course of earning your assessable income.

Applying the Maddalena principle above, the course fees were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Therefore, you are not entitled to a deduction for the course fees you have incurred.