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

Ruling: Q1: Are you able to claim self-education expenses you have incurred in order to obtain employment? | A1: 

Relevant facts and circumstances: In order to obtain employment, with your current employer, you were required to undertake a mandatory certification course. This course was required as you have been out of the industry for many years. You incurred expenses as a result of undertaking this course which included: course fees, related licences and fees, travel and stationery. You will not be reimbursed for these expenses by your employer.

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

Reasons for decision: Summary: Your self-education expenses were incurred in order to obtain employment. As such, the expenses were incurred at a point too soon to be regarded as incurred in the course of gaining or producing your assessable income in your new employment. Therefore, your self-education expenses are not deductible. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for any 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 · 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. In your case, in order to secure employment with your now current employer, you were required to undertake a certification course. This course was required as you have been out of that particular industry for many years. It was only on completion of the course, and obtaining certification, that you were able to secure this new employment. Your self-education expenses were not incurred in gaining or producing assessable income in your current position. The expenses were incurred in order to get employment or, obtain new employment. As such, the expenses were incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income in your new employment (in which the skill or knowledge learned was required). Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.

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