Private ruling: Self-education expenses
Published: May 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for your self-education expenses? | A1: No.

Relevant facts and circumstances: You are employed in a particular field. You are looking to commence a course that you believe will be beneficial to your career. In order to attend the course you will formally resign from your employment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: 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. No deduction is allowable for self-education expenses if the study is 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 are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. A court decision that is relevant in your case is FC of T v. M I Roberts 92 ATC 4787; (1992) 24 ATR 479. Mr Roberts was employed in Australia as a mine manager. After applying on a number of occasions for admission to various overseas MBA programs, he accepted a place at an American university to study full-time for an MBA. Shortly thereafter he was retrenched, with his consent, from his mine manager position and travelled to the US to undertake the MBA. On his return to Australia, he was re-employed as a mine manager by another company at a significantly increased salary when compared with his previous position. However, the Federal Court disallowed a deduction for his expenses associated with the course. The expenses were considered to be incurred at a point too soon to be incurred in earning income from his future employment. Your situation is similar to that of the taxpayer in FC of T v. M I Roberts. At the time you plan to take the course you will be unemployed. Therefore, the expenses of your course will be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income from your future employment. Also, the expenses will not be incurred in earning the income from your current employment as that income will already have been earned when the expenses will be incurred. Therefore, the expenses are not allowable under section 8-1 of the ITAA 1997.