Private ruling: Self-education expenses
Published: February 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a deduction for self-education expenses incurred in association with your course? | A1: No.


Relevant legislative provisions: You were employed in a particular field. | You took the view that success in the role would be enhanced by completing a particular course. | You ceased your employment and enrolled in this course. | Throughout this course you were still registered to be able to work in your field. | After completion of the course you commenced work with a new employer in an employment position where you utilise the knowledge and skills you obtained from the course you had completed.

Reasons for decision: Summary: Your self-education expenses were incurred while you were unemployed. These expenses were incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income from your future employment. Also, the self-education expenses were not incurred in earning the income from your previous employment as that income had already been earned when the expenses were incurred. 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. 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). The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. A court decision that is relevant in your case is FC of T v. M I Roberts 92 ATC 4787; (1992) 24 ATR 479. Mr Roberts was employed in Australia as a mine manager. After applying on a number of occasions for admission to various overseas MBA programs, he accepted a place at an American university to study full-time for an MBA. Shortly thereafter he was retrenched, with his consent, from his mine manager position and travelled to the US to undertake the MBA. On his return to Australia, he was re-employed as a mine manager by another company at a significantly increased salary when compared with his previous position. However, the Federal Court disallowed a deduction for his expenses associated with the course. The expenses were considered to be incurred at a point too soon to be incurred in earning income from his future employment. Your situation is similar to that of the taxpayer in FC of T v. M I Roberts. At the time you undertook the course you were unemployed (although you were still registered as a medical doctor in Australia). Therefore, the expenses of your course were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income from your future employment. Also, the expenses were not incurred in earning the income from your previous employment as that income had already been earned when the expenses were incurred. Therefore, the expenses are not allowable under section 8-1 of the ITAA 1997.

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: Income Tax Assessment Act 1997 Section 8-1