Private ruling: self-education expenses
Published: January 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

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

Relevant facts and circumstances: You completed a part time course in an industry during the 2012/13 financial year. You plan to start freelancing in the future. At the time you completed your course you were not employed in the industry.

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, or relate to the earning of exempt income. Taxation Ruling TR 98/9 discusses circumstances under which self-education expenses are allowable as a deduction. 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. The phrase 'current income-earning activities' refers to the income-earning activities of the taxpayer at the time the self-education expenses were incurred. 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 to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. In your case, at the time you undertook the course you were not employed in the industry. Therefore, at that time, your studies were not undertaken to maintain or improve an existing skill or knowledge used in your 'current' income-earning activities. Nor can it be said that the subject of your studies 'objectively led to, or was likely to lead to' a future increase in income from your 'current' income-earning activities. Accordingly, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for your self-education expenses incurred to undertake the course.