Private ruling: Self education expenses
Published: July 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction for self education expenses? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident. You are currently employed at a primary school as the co-ordinator for the pre and post primary school student care facilities. This includes primary school care during all vacation periods. Your duties include organising children's programs and activities which cover children's developmental areas and also the business side of the pre and post primary school care facilities. Your co-ordinator position description describes a key responsibility as being 'appropriately qualified or in training'. While in your current employment, you commenced a Bachelor of Education degree. The study you are undertaking is helping you prepare the educational activities and programs for the children, deal with a broad range of age groups and behavioural issues. Your employer provides you with leave when necessary (that is, for study and prac). You will not receive any allowance or reimbursement for your study. At the completion of your degree, your rate of pay will increase as your employer increases wages depending on experience and qualifications. The course fees have not been paid under the HECS-HELP scheme.

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 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. Taxation Ruling TR 98/9 discusses circumstances in which self education expenses are allowable as a deduction. If a taxpayer's current 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, the self education expenses are allowable as a deduction. Paragraph 14 of Taxation Ruling TR 98/9 states that 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, the self education expenses are allowable as a deduction. 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 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 (paragraph 58 of Taxation Ruling TR 98/9). In your case, your current income-earning activities are based on the exercise of a skill or some specific knowledge regarding primary education. The subject of your self education enables you to maintain or improve that skill or knowledge. You have stated that your pay rate will increase at the completion of your degree. The study you are undertaking will lead to an increase in income from your current income-earning activities. Therefore, your self education expenses, that is, the course fees and books costs, are allowable as a deduction. | Detailed Reasoning - Section 82A of the Income Tax Assessment Act 1936 (ITAA 1936): Section 82A of the ITAA 1936 applies to reduce a deduction allowable under section 8-1 of the ITAA 1997 for expenses of self education by up to $250 in certain circumstances. The term 'expenses of self-education' is defined in subsection 82A(2) of the ITAA 1936 and generally means expenses that are necessarily incurred for, or in connection with a prescribed course of education. A prescribed course of education is also defined in subsection 82A(2) of the ITAA 1936 to mean a course of education provided by a school, college, university or other place of education that is undertaken by a taxpayer for the purpose of gaining qualifications. In your case you are undertaking a prescribed course of education. Consequently section 82A of the ITAA 1936 applies to your circumstances. An explanation of how this provision operates in relation to working out your self education expenses is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on our website www.ato.gov.au or pages 37 and 38 of TaxPack 2011 .

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