Private ruling: Self Education Expenses
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for self education expenses? Answe r No


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, relate to the earning of exempt income or are precluded from deduction by another provision of this Act. Taxation Ruling TR 98/9 states self-education expenses are allowable as a deduction if your current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables you to maintain or improve that skill or knowledge. Similarly, 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, 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 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. The issue of self-education expenses and casual employment was considered in Gupta v. FC of T 2002 ATC 2319; (2002) 51 ATR 1205. In that case the taxpayer commenced a Bachelor of Computer Science degree, and subsequently began casual work at the university's School of Computing and Information Technology as a computer laboratory assistant. The Administrative Appeals Tribunal held that the essential character of the expenses was to qualify the taxpayer through obtaining his degree so that he could get ahead within the Information Technology industry to a more highly paid position. They accepted that his experience gave him the knowledge necessary for the casual university work, which was relatively low-skilled and routine. They found that on completion of the degree, however, the taxpayer would have acquired more highly developed skills, qualifying him to undertake more responsible and demanding work than previously. It was held that the expenses were not incurred in gaining or producing the taxpayer's assessable income from casual work at the university that income was merely incidental to the studies. The expenses were incurred in getting future work, and they came at a point too soon. In your case the expenses you incur for your degree are considered to have been incurred in the pursuit of obtaining your qualifications and to obtain future employment and not in gaining or producing your assessable income from the casual work you performed while studying. The income you earned from your casual work was merely incidental to your studies. The fact you obtained employment in a related industry as that of your study is not considered decisive. Rather, your circumstances are more aligned to those in Gupta's case , in that you were studying while working part-time. It is considered that your study was to enable you to obtain qualifications that would allow you to secure a full-time employment and a more highly paid position at a later date. Therefore, it is considered that your self education expenses are not incurred in earning your assessable income. Rather, they are incurred to enable you to complete your degree and to seek better work in your chosen field. As such, the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income and are not deductible under section 8-1 of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: | · the application for private ruling, | · copies of the above job descriptions and duties performed | · further written information. | You work fulltime in a particular field. | You also have a casual position in a different field. | You usually work 1 weekend a month on call from Friday afternoon to Monday morning. | You have a number of years experience and have done numerous courses relating to your casual position. | You decided to undertake a degree through a university. | You did this to give a more formal qualification and in case you wanted to do more work in the future with other organisations or work as a consultant. | You have completed a number of subjects as well as been given credit for another number of units. | You have incurred expenses in subject fees and text books. | You have not received any allowances or reimbursement of costs from your employers toward your study. | You study in your own time and do not get any leave to undertake the study. | You will be paid a higher hourly rate once you complete the degree.