Private ruling: Self-education expenses
Published: November 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you entitled to a deduction in relation to your course fees and your computer? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 40-25.

Reasons for decision: Summary: Your self-education expenses were incurred while you were unemployed. Therefore, these expenses were incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income. Accordingly, you are not entitled to claim a deduction for these expenses. | Detailed Reasoning - Detailed reasoning: 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. Section 40-25 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset (such as a computer) if it is used in producing 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 designed to enable a taxpayer to get employment, to obtain new employment or open up a new income-earning activity, whether in business or in the taxpayer's 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 ( Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, 48 and 62 of TR 98/9). In your case, you have been off work due to a disability and have undertaken a course to help you to return to the workforce. Although the course was in the field that you were previously employed in, it was still undertaken while you were not employed and was designed to assist you to obtain employment. Applying the Maddalena principle above, your self-education expenses were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Therefore, you are not entitled to a deduction for these expenses.

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. | Relevant facts: You have been off work for a period due to a medical condition. | You wish to return to the workforce and have undertaken study in the field you were previously employed in. | You have incurred expenses for the purchase of a computer and course fees.