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

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

Relevant facts and circumstances: You are studying for a degree and expect to complete the course in relevant year. You intend to work in your field of study. In the relevant year you undertook work experience with a business in your area of study. This went for several weeks and you were paid as a casual worker for your time. Following the work experience, the business offered you employment with them commencing in subsequent year. You are not otherwise employed in the industry. You have incurred expenses in relation to your undergraduate 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 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 in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. TR 98/9 says the fact that the study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity is not a sufficient basis in itself for self-education expenses to be deductible. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. TR 98/9 also considers the circumstances where work experience is involved. TR 98/9 gives the example of a person, who is undertaking a 4-year university degree in mining engineering, takes a job as a casual employee with a mining company during the end of year holiday period. It is the company's policy to take only students who are pursuing relevant studies. The person is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon. In your case, you are not employed in the field that you are studying. Your study is designed to gain you employment in the future and your work experience was incidental to this endeavour. Your study is designed to get you employment in your field of study, not derive income from work experience. A deduction is not allowable for self education expenses if the study is designed to enable a taxpayer to obtain new employment. The expenses come at a point in time too soon to be regarded as being incurred in gaining or producing assessable income. It is considered that the study you undertook was for the purpose of obtaining new employment and therefore, you are not entitled to a deduction for self education expenses.