Private ruling: Self-education expenses
Published: March 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 incurred in relation a course? | A1: No.

Relevant facts and circumstances: You own rental properties from which you derive assessable income. You are also employed full-time in an unrelated field. You are not carrying on a business of property investing or letting properties. You incurred expenses in relation to the course in the 2012-13 financial year. The course you have completed is geared towards providing investors with skills, knowledge, resources and ongoing assistance to profit from property investment through implementing property options strategies. It also includes general advice about creating cash flow from properties and provides 12 months access to an experienced property coach. You have always been very interested in the property market, and will use the course to build your knowledge of property investment strategies, and ultimately wealth, through increasing your property portfolio in the future.

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 or are necessarily incurred in carrying on a business for the purpose of 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. The deductibility of self-education expenses fall for consideration under section 8-1 of the ITAA 1997. 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 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, TR 98/9 states that 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. 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. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. In your case you own investment properties and have had an interest in the property market. However you are employed full-time in an unrelated field. You have completed a course which is geared towards income generation from investing in property options, which does not form a part of your current property investment activity. Further, the course content will provide you with skills, knowledge, resources and ongoing assistance which will assist you in acquiring investment properties in the future. As such the cost of the course was incurred at a point too soon to be incidental and relevant in gaining or producing assessable income from your current investment property activities, and is capital in nature. Therefore a deduction is not allowable under section 8-1 of the ITAA 1997.