Private ruling: Self-education
Published: October 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | A1: No.


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 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 TR 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. Similarly, if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer's income from his or her current income earning activities in the future, a deduction is allowable. However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 62 of TR 98/9). The applicant in Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549 claimed a deduction for expenses that led to her admission as a solicitor. The Tribunal held the admission fees were of a capital nature and were, therefore, not an allowable deduction. The admission expenses secured the applicant a 'lasting advantage'. Although you may gain knowledge and skills from the course that could be of some assistance in your work, the skills gained are well in excess of the skills required to undertake your current duties. This is supported by your duty statement which lists a Year 10 education as the minimum requirement. Furthermore, completing the exam will secure you a lasting advantage. It is considered that the study is designed to open up a new income earning activity. As such, the expenses are incurred at a point too soon to be regarded as incurred in producing your assessable income. Consequently you are not entitled to a deduction for the expenses.

Relevant facts: You are employed as an assistant. | Your job description states the required qualifications is a minimum of year 10 with a minimum of three years' experience. | Your duties include accounts payable and accounts receivable. | You commenced a course overseas in 2002. | You have completed most of the course already. | You intend completing the course overseas as it is the cheaper option. | You can do the study in Australia but you must travel overseas to sit the exam.