Private ruling: Self-education expenses
Published: July 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for self-education expenses you incurred in 2012? | A1: No. | Q2: Are you entitled to a deduction for self-education expenses you incurred in 2013?

Relevant facts and circumstances: You came to Country A and obtained your permanent resident visa. Prior to coming to Country A you worked for a number of years as a project analyst for an international organisation and continued your employment with the same organisation as a contractor in regards to a specific project at the time of coming to Country A. Your contract ceased a year later. You had previously completed a degree in Country B Your responsibilities in your chosen field included: · Compiling, analysing and consolidating financial reports concerning social and economic development projects · Designing and managing development projects · Reconciling expenses and internal auditing of international grants · Designing guidelines and reporting procedures for internal and external audiences · Communication management · Consolidatiing the project's financial reports · Consolidating technical progress reports from different fields · Developing and implementing monitoring tools for reconciliation of expenses and financial monitoring You also worked part-time as an administration officer and have provided a list of duties. You later commenced your current full-time employment with a local government council. You have provided a list of your duties. You enrolled in a course for a degree at metropolitan university full-time and later changed to part-time. The course you have undertaken has helped you understand your job better and provides a chance to get a better income in your current work by providing new skills and knowledge. You provided details of the course subjects. You mentioned that the degree will provide you with academic tools to be used with your current employment. You have incurred course fees which have been paid in the 2012 and 2013 calendar years and your employer has provided a reimbursement of some of the fees. You have documentation to support the expenses incurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1936 Section 82A

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. Taxation Ruling TR 98/9 (TR 98/9) provides the Commissioner's view for the circumstances under which self-education expenses are allowable as a deduction. TR 98/9 provides that a deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge ( Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348. 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 taxpayers 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 (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; TR 98/9). In your case, at the time you commenced your studies for a degree you were employed with your overseas employer. You later took part-time work before commencing your current employment | Detailed Reasoning - Expenses incurred 2012: It is considered that there is insufficient nexus between your income earning activities and the degree you commenced at the time of coming to Australia. The self-education expenses associated with your studies at that time are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income and therefore are not allowable as a deduction under section 8-1 of the ITAA 1997 | Detailed Reasoning - Expenses incurred 2013: However, the self-education expenses you have incurred from the time you commenced your current employment have sufficient nexus to your current income earning activities. It is accepted that the course you have undertaken will enhance the skills and knowledge that are required in the performance of your current employment duties Consequently, the self-education expenses incurred in undertaking this course have the necessary and relevant connection with the earning of your assessable income. Therefore you are entitled to a deduction for the self-education expenses you paid in 2013, less any reimbursements you have received from your employer, under section 8-1 of the ITAA 1997. Please note that the self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on the Tax Office's website at www.ato.gov.au.