Edited version of your written advice

Authorisation Number: 1013130465943

Date of advice: 24 November 2016

Ruling

Subject: Self-education expenses

Question 1

Are you entitled to claim a deduction for expenses incurred in relation to self-education expenses?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were employed by a financial institution.

You lodged a compensation claim against your employer. You received no support or assistance from your employer for 12 months.

You took the matter to the Administrative Appeals Tribunal (AAT) and a decision was made.

The decision was appealed by your employer however a notice of discontinuance was lodged by your employer.

In the decision made, the AAT ruled that you were no longer able to be employed by another financial institution.

Due to this decision being made by the AAT you had discussions in regards to future employment.

As you are no longer able to be employed by another financial institution, you made the decision to undertake courses to start your new career in this field of work.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Detailed reasoning

Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature.

The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9. These guidelines have been established through the views taken by the Courts, Boards of Review and Administrative Appeals Tribunals.

In accordance with paragraphs 13 and 14 of TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 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; or,

● 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 their current income earning activity in the future.

Therefore, provided there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for your self-education expenses.

However, as stated in paragraph 15 of TR 98/9, self-education expenses will not be deductible if the study is intended to:

● enable you to get employment,

● enable you to obtain new employment, or

● to open up a new income-earning activity (whether in business or in your current employment).

This view is supported by the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541, which establishes the principle that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Application to your circumstances

The courses you are undertaking will assist you to obtain new skills and specialised knowledge, and will provide you with a qualifications that will enable you to get employment or to open up a new income-earning activity. Therefore you are not entitled to a deduction for self-education expenses.