Cheung v. FC of T: Tax Code and Self Education Expenses
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The Australian Administrative Appeals Tribunal (AAT) handed down a decision in March 2008 in the case of Cheung v. F C of T, holding that self-education expenses incurred by a full-time hospitality management student who worked at two hotels during the course of her studies were not deductible ("Self-Education Expenses Not Deductible," 1). At issue in this analysis is a description of the decision by the AAT, a summary of the facts of the case, the rationale for the decision, and the general principles that can be discerned from this decision and whether or not the taxpayer (Cheung) is likely to be successful on appeal. The case relates to Section 8.1 of the Income Tax Assessment Act of 1997 ("General Deductions," 1), which affirms that taxpayers can deduct from the assessable income any loss or outgoing "to the extent that (a) it is incurred in gaining or producing your assessable income; or (b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income." Perhaps most specifically, the issue in Cheung revolves around whether or not educational expenses incurred by the taxpayer were necessary to gain or produce the assessable income that the plaintiff earned while in school. Richards (1) points out that the tax law "specifically encourages taxpayers to claim deductions for contributions which effectively have no economic cost." At the same time, in the case of Cheung, the facts mitigate against allowing a s
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ividual undertakes a work-related course to obtain a formal qualification from a school, college, university, or other educational institution. The course must be sufficiently connected to the taxpayer's current employment. Only expenses for self-education that are related to work at the time that the taxpayer was studying are allowed.
Further, the Australian Tax Office (1) affirmed self-education expenses must be incidental and relevant and it is on these criteria that the courts have ruled regarding deductions in such cases as Commissioner of Taxation v. Klan (320) and Re Tobias and Federal Commissioner of Taxation (1169). In addition, in Commissioner of Taxation v. Roberts (125), a taxpayer must remain in the employ of the same employer at all times to claim a deduction that will be incidental and relevant to the gaining of assessable income and establishing that the expenditure has the essential character of an income-producing expense.
Cheung was not in the employ of either of the two hotels where she worked during her Diploma course industry placement semesters when she claimed her degree-related deduction. She was a full-time student and then was an employee at a third hotel. In essence, this plaintiff sought t
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Approximate Word count = 1504
Approximate Pages = 6 (250 words per page)
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