Private ruling: Self-education Expenses
Date of advice: 1 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
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 (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 TR 98/9 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 taxpayer's 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). Also, if a course of study is not specific enough in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist. This is the case even if the study will be of some benefit to the taxpayer in undertaking their income-earning activity. For example, in FC of T v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; (1971) 2 ATR 557, a primary school teacher was not allowed deductions for university fees incurred on an Arts degree course as the High Court considered that there was not a sufficient connection between the course and the taxpayer's employment. The High Court stated that it was not enough that Mr Hatchett's employer encouraged him to undertake the course, nor that the course was likely to make Mr Hatchett a better teacher in a general sense. In your case, you are employed in a position involving chemistry and biotechnology. You commenced a full-time university course that is designed to prepare graduates to a medical field. Although you may gain knowledge and skills from the course that could be of some assistance in your work, the predominant focus of the course is to prepare students to eventually work in a medical field. It is considered that viewed objectively your study is not to assist you in your work, but to enable you to obtain qualifications that would allow you to secure full-time employment in another field in the future. As there is an insufficient nexus between the course of self-education and your income earning activities, the self-education expenses associated with the course are not incurred in earning your assessable income. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997. Even if there was a sufficient nexus between your medical degree and your employment, your course fees would still be excluded from being deductible by the operation of section 26-20 of the ITAA 1997. This section operates to specifically exclude course fees paid through HECS-HELP from being deductible; this is the case regardless of whether the course fees are deferred or paid up front.

You have qualifications in this field. | Your work also touches on the medical field. | You have commenced tertiary study in medicine and you say this is to help you better understand the pharmaceutical and medical processes that you work on. You state that you chose this course because you consider it to be an efficient and quick way to gain a broad knowledge of medical matters. | You are studying on a full-time basis and have reduced your work hours to accommodate your study. | The university states that the course prepares students to work as an interns in hospitals and in general practice. | You have stated that you are uncertain whether in four years' time you would use your new qualifications. | Your course fees are paid through HECS-HELP.