Deductibility of Self-education Expenses

In a recent decision, the Federal Court held that a taxpayer who was receiving the Youth Allowance was entitled to a deduction for self-education expenses incurred.

The taxpayer was studying a teaching degree and did not derive any income from employment as a teacher.

The court said that the taxpayer’s ultimate motive in undertaking the degree was irrelevant to the characterisation of the expenses. Rather, its opinion was that the expenses were incurred as a necessary incident of deriving the Allowance. Accordingly, the court held that the expenses were deductible.

The Commissioner’s established view is that, generally, recipients of Commonwealth educational assistance schemes payments are not entitled to a deduction for self-education expenses. This is because the expenses are not incidental and relevant to the payments.