Private ruling: Self-education expenses
Published: September 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 01 July 2011

Ruling: Q1: Are you entitled to a deduction for your self-education expenses incurred to undertake full-time study? | A1: No.

Relevant facts and circumstances: Shortly after commencing employment you realised that you needed to increase your knowledge related to your employment duties. You identified a number of courses that you believed would provide the knowledge that you lacked. You intended to enrol part-time and continue with your current employment. You later decided to take time some time to focus on completing the courses on a full-time basis. You resigned from your employment to commence full-time study. You intend to seek employment upon completion of your studies.

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 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. The deductibility of self-education expenses falls for consideration under section 8-1 of the ITAA 1997. Therefore, in considering whether you are entitled to a deduction for the costs incurred in undertaking your full-time study, it is necessary to consider whether the expenses were incurred in the course of gaining or producing your assessable income. 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, 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. They are incurred in getting, not in doing, the work which produces the income (High Court decision in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). In your case, when you commenced your full-time study you were unemployed. 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 your income from your 'current' income-earning activities. The expenses associated with your course are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Accordingly, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for your self-education expenses incurred to undertake full-time study.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.