Private ruling: Work related expenses self-education
Date of advice: 30 October 2018
Published: January 2019
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 February 20XX

Ruling: Q1: Am I entitled to a deduction for textbook costs, stationery costs, “Amenity fees”, parking fees as well as other ongoing costs whilst studying a Batchelor Degree? | A1: No

Relevant facts and circumstances: You have worked in industry A for X years. You started a business in autumn 20XX and also commenced a Batchelor Degree at a local College of Higher Education. The course fees for this qualification will be paid by the HELP Scheme however you have also incurred other costs such as – ● Books ● Stationery ● “Amenity fees” ● Parking costs ● Other (unspecified) ongoing costs When you commenced the business you began to provide services such as are allowed without study or higher qualifications. You wish to complete the qualification as this will allow you to apply other treatments using your qualification. These new procedures can only be offered by a qualified person in your profession. Once you complete your qualification you will therefore be able to offer a wider range of treatments and procedures which will expand your business income and possibly allow you to earn a higher business income. You also believe that a qualification will benefit your business as you will be better qualified to render assistance to clients in need.

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 Taxation Ruling 98/ 9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge, and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge ( Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348). Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education. Paragraphs 33 and 34 of TR 98/9 are particularly relevant – 33. The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; Hayley v. FC of T (1958) 100 CLR 478 at 497-498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435). 34. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91). Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. Based on the evidence available in support of this application it is considered that the qualification you propose to study has insufficient connection to the skills or knowledge used in your current income earning activity as to justify deductibility for this study. The essential character of the expenses you wish to claim is that they were incurred to enable you to obtain new sources of business revenue through the ability to offer procedures which can only be offered by a qualified professional in your industry. The self-education expenses have therefore been incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income. Consequently, your self-education expenses are not deductible under section 801 of the ITAA 1997.