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 self-education deduction in the view of the court. Cheung was enrolled full-time in 2004 as a student in the Diploma of Hospitality Management at the Blue Mountains Hotel School during which time she was required to spend effectively two semesters in industry placements in hotels or similar businesses.
During these placement activities, Cheung elected to complete two additional semesters of full-time, on-site study during which she could not work at the h...