Private ruling: Deductions - self-education expenses
Published: August 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

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

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are employed. Your employment commenced a number of years ago. Your current employment with the Government Department is as a X. During the 2012-13 income year you were studying part-time undertaking a course of study. You have incurred Fee-Help tuition and text book costs in relation to your study. You argue that the purpose in studying was to maintain and improve your skills for your current position and hopefully make yourself more attractive for opportunities that arise as part of that position which are likely to lead to an increase in your income in the future. You believe that through studying you are able to: · make better decisions · assess other implications of your work · understand how other areas you work with function, and how you can work with them more effectively · provide better advice, guidance and recommendations to your stakeholders.

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

Reasons for decision: Summary: 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 Commissioners view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, self-education expenses are allowable as a deduction 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 activities in the future. Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, a deduction will not be allowed 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). Paragraph 48 of TR 98/9 refers to the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 ( Maddalena's case ). That case established that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Paragraph 58 of TR 98/9 considers that Maddalena's case also supports the Commissioners view that 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. In Case Z1 92 ATC 101; AAT Case 7541 (1991) 22 ATR 3549, a public service clerk studying a law degree later obtained a legal officer position in the public service. Such expenses of self-education were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. A further example is provided in Paragraph 59 of TR 98/9. Joseph is currently employed as a clerk in a public service department. He would like to transfer to a position in another section of the department and undertakes a course of study designed to equip him with the skills needed in that position. The study is unrelated to the skills required in his current position and is not likely to lead to an increase in income. As the study is designed to enable Joseph to enter a new income earning activity, no deduction is allowable. In your situation, you are employed as a X and are completing your studies. It is considered that the connection, or nexus, between the studies and your employment is insufficient. The study is too general in nature to be considered relevant to your current income producing activity. While undertaking the studies may improve your future employment prospects, it is considered that the expenses have been incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income. Accordingly, you are not entitled to a deduction for the costs incurred in undertaking your studies.