Private ruling: Self-education expenses
Date of advice: 27 January 2016
Published: March 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for expenses incurred for the training course? | A1: Yes.

Relevant facts and circumstances: You have worked in your field of speciality for many years. You were made redundant and shortly afterwards obtained employment in the same field with a new employer. After commencing employment you undertook a training course during the relevant income year. You received a regular salary from your employer whilst you were attending this training. You entered into a written agreement with your employer under which you borrowed an amount in order to pay for the training course. After working for a period you resigned during the subsequent income year, at which time you repaid the amount borrowed, as per the conditions of the agreement.

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) states that you can deduct from your assessable income any loss or outgoing to the extent to which it is incurred in gaining or producing, your assessable income, except where the loss or outgoing is of a capital, private or domestic nature. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if: • a taxpayer's 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 on that skill or knowledge • 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, a deduction is allowable However, no deduction is allowable for self-education expenses if the study is 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. In your case, you undertook training while you were employed and receiving income from that employment. Therefore it cannot be said that the training was undertaken at 'a point too soon'. Taxation Ruling TR 97/7 provides that to qualify for a deduction under section 8-1 of the ITAA 1997 a loss or outgoing must have been incurred. Paragraph 6(a) states: (a) A taxpayer need not actually have paid any money to have incurred an outgoing provided the taxpayer is definitively committed in the year of income. The costs of the training course were paid through a loan from your employer and you were required to repay this amount upon your resignation. It is accepted that you incurred expenses in relation to the training at the time you committed to the training course and consequently the course expenses. Your income earning activities were based on the exercise of specific skills and knowledge and the training undertaken enabled you to maintain or improve your skills and knowledge. As such, the expenses you incurred in relation to your training are deductible in the year they were incurred, being, the relevant year. | Detailed Reasoning - Additional information: 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 ATO website at www.ato.gov.au.