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Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self education expenses?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You have been in a business industry involving administration, management and selling.

You had been employed as a manager.

Your qualifications were at the time in business and management.

You undertook a course over four years at an Open University.

The course included the following subjects:

· Development processes

· Planning law

· Introduction to Urban and Regional Planning

· Regional Planning

You paid cash for your first subject. For the remaining subjects you received a loan under FEE-HELP to pay your tuition fees.

You provided a list of your employment duties at the time of your studies.

You undertook the course to advance your career and increase your knowledge of the industry.

You later commenced employment with private developers.

Your duties are basically the same as your previous employment.

You incurred expenses relating to your course.

You studied during your own time and received no allowances from your employer.

Your employer did not encourage you to undertake the course but felt the information would be to their advantage.

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 or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education 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 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; (1961) 8 AITR 406).

Similarly, if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer 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 open up a new income earning activity, whether in business or in the taxpayers 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 (FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161).

In your case, you were employed as a property manager with a real estate agency. You undertook the course to advance your career from residential to commercial asset management and increase your knowledge of the complexities of commercial asset management and how the property industries are interconnected.

Even though the subject studied may have some similarity to your current role as a manager, when viewed objectively, the predominate focus of the course is to provide the skills to become a fully qualified planner and it is considered that you are opening a new field of employment.

Thus, you are unable to claim self education expenses under section 8-1 of the ITAA 1997 because the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.