Deductions and expenses: Self Education Expenses (Postgraduate Study Overseas)

Whether expenses incurred in undertaking a postgraduate course of study at an overseas university by a lawyer are an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997.

The expenses incurred by the taxpayer in undertaking the course of study are not deductible under section 8-1 of the Income Tax Assessment Act 1997 .

A taxpayer is qualified as a lawyer. Having ceased employment with a law firm, the taxpayer applies to undertake a postgraduate course of study in law at an overseas university in order to improve the taxpayer's professional knowledge and skills in the law. In attending the course, the taxpayer incurs a number of expenses such as course fees, union fees, application fees, airfare costs, and material costs. The taxpayer intends to continue to work in the field of law upon completing the course.

The expenses incurred by the taxpayer in undertaking the course of study are not sufficiently related to the earning of assessable income to be described properly as having been incurred in the course of gaining or producing that income as the taxpayer is in between jobs during the duration of the course ( FC of T v Klan 85 ATC 4060; 16 ATR 176). Taxation Ruling TR 98/9 sets out the Commissioner's views on the circumstances in which self-education expenses are allowable as deductions. The Ruling states that where there is a break in employment, the expenses will generally be incurred at a point too soon to be regarded as incurred in gaining or producing income, and will therefore not qualify for deduction under section 8-1 of the Income Tax Assessment Act 1997 .

The expenditure incurred is more properly characterised as expenditure incurred for the purposes of obtaining a new position ( FC of T v Klan 85 ATC 4060; 16 ATR 176). Such expenses are incurred at a point too early in time to be deductible, ( FC of T v Maddalena 71 ATC 4161; 2 ATR 541).