Private ruling: Business - self-education expenses
Date of advice: 15 July 2025
Published: 22 September 2025
Ruling period: Year ending 30 June 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: Will your self-education expenses incurred during the relevant income year be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Will your self-education expenses incurred during the relevant income year be an allowable deduction under section 8-1 of theITAA 1997? | A2: No.

Relevant facts and circumstances: Business activity You are an individual sole trader working as a professional musician. During the relevant income year, you provided live music entertainment services in addition to music tutoring services. You performed 97 live performances during the income year. Each performance was typically 3-4 hours with 85% of the performances completed as a solo artist. Your performances involved singing, including your own original material, and playing guitar. In MM 20XX you released your first single and intend to release more music in the future to generate income through royalties. Self-education details You were accepted into a college based overseas to undertake a Bachelor of Music in Performance. You left Australia on DD MM 20XX to commence your studies. You are living in a rented apartment overseas. Your student visa restricted you from working anywhere outside the campus for the first 12 months. The start date of your course was DD MM 2XX and your estimated course completion date is DD MM 20XX. You have provided details from your course transcript for the relevant term. The subjects undertaken during your first term were all music subjects to achieve a Bachelor of Music in Performance. In particular, the subjects relate to musicianship, performance, tutoring and more which relate to income-producing activities of an artist and performer. The intent of your studies is to: The course you are undertaking also gives you opportunities to make industry contacts and get extensive experience in both music performance and music business. Your goal as a musician is to become an international artist. Self-education expenses You have provided a student statement detailing the amounts paid to the college for the relevant term. The statement provides that you paid $X on DD MM 20XX for your tuition fees for the relevant term. You received a scholarship payment toward your tuition fees. At the time that you made the tuition payments, you were performing as a musician through your sole trader business. 20XX income year During the 20XX income year, you performed X live performances in Australia. You were in Australia for approximately 25 days during the relevant income year. The rest of the time you were located overseas. You were unable to work while overseas during this time due to your student visa restrictions. You have provided a transcript of the subjects undertaken during the relevant income year. You have also provided tuition statements which detail the self-education expenses paid during this time. The statements provide that you paid $X on DD MM 20XX for your tuition fees for the fall term and $X on DD MM 20XX for the spring term. You were awarded a scholarship payment toward your tuition fees for each term.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 Question 1

Reasons for decision: Summary: The rules for general deductions are contained under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). You can deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. You can't deduct outgoings that are of a capital, private or domestic nature or relate to earning exempt income. Circumstances in which self-education expenses are allowable are discussed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual (TR 2024/3). 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). 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 their current income-earning activities in the future, a deduction is allowable. However, self-education expenses will not be deductible if the study is intended to: Self-education expenses that are designed to enable a taxpayer to get employment or to obtain new employment are considered to be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Expenses are therefore not deductible in those circumstances. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. Overseas study The deductibility of self-education expenses where a taxpayer incurs them for overseas study is explored in paragraph 28 of TR 2024/3. If the overseas study expenditure results in you being better equipped to perform your current income-earning activities, it is deductible where there is a requisite connection to your income-earning activities at the time. Some factors to demonstrate a requisite connection include: Health insurance The deductibility of insurance policies is explored in ATO Interpretative Decision ATO ID 2001/615 Income tax: Deductibility of travel insurance (ATO ID 2001/615). Expenses such as insurance policies invariable cover items that are generally private in nature. Insurance policies cover items that are generally private in nature, including illness. ATO ID 2001/615 discusses Waters v Federal Commissioner of Taxation [2010] 2010 ATC 10-157 which held that a taxpayer who had acquired travel (including medical) insurance prior to commencing work overseas was not entitled to a deduction. This expenditure could not be regarded as being incurred by the taxpayer 'in the course of' gaining or producing their assessable income and was otherwise not deductible as it was an expense of a private or domestic nature. | Detailed Reasoning - Application to your circumstance: To determine whether circumstances exist that support your self-education deductions, there must be a sufficient connection between you incurring the expense and your current income-earning activities. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case. In your case, you are undertaking the course for the purpose of maintaining and improving your skills and knowledge required as a professional musician. At the time you incurred the expenses, you were conducting your sole trader business as a performing musician. The Commissioner accepts there is an identifiable connection between your income-earning activities as a professional musician and your studies overseas. The subjects of study are useful to your income-earning activities and are sufficiently connected to your work as a professional musician. The self-education is likely to lead to an increase in your income from your current income-earning activities as a musician in the future. The study is also not intended to gain new employment or open a new income-earning activity. There is a sufficient nexus between the expenditure and your income-earning activities during the relevant income year. You are therefore able to deduct the expenses that you incurred under section 8-1 of the ITAA 1997. As your tuition fees are made up of several different components, the deductibility of some expenses are treated differently. Scholarship Your tuition fees were reduced by a scholarship payment. This amount is not deductible under section 8-1 of the ITAA 1997 as the expense was not incurred by you. You can only deduct the portion of the tuition fees that were incurred by you to the extent that they relate to your income-earning activities. Health insurance You incurred the costs of student health insurance expenses which was a component of the tuition fees. Although it is accepted that these expenses were paid as a pre-condition to enable you to attend the college, these expenses are private in nature. They will therefore not be deductible under section 8-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: The rules for general deductions are contained under section 8-1 of the ITAA 1997. You can deduct from your assessable income any loss or outgoing to the extent that it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. You can't deduct outgoings that are of a capital, private or domestic nature or relate to earning exempt income. Circumstances in which self-education expenses are allowable are discussed in TR 2024/3. 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). 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 their current income-earning activities in the future, a deduction is allowable. However, self-education expenses will not be deductible if the study is intended to: Self-education expenses that are designed to enable a taxpayer to get employment or to obtain new employment are considered to be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Expenses are therefore not deductible in those circumstances. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. The deductibility of self-education expenses where a taxpayer incurs them for overseas study is explored in paragraph 28 of TR 2024/3. If the overseas study expenditure results in you being better equipped to perform your current income-earning activities, it is deductible where there is a requisite connection to your income-earning activities at the time. Some factors to demonstrate a requisite connection include: | Detailed Reasoning - Application to your circumstance: Overseas study expenditure is deductible where there is a requisite connection to your income-earning activities at the time. Due to your student visa restrictions, you were not able to work for most of the income year and only performed as a professional musician on several occasions. There is little regularity and repetition of your income-earning activities demonstrated at the time you were undertaking the study during the relevant income year. The Commissioner considers that the self-education expenses incurred by you during the relevant income year did not have the requisite connection to your income-earning activities at the time. You are therefore not able to claim a deduction for self-education expenses under section 8-1 of the ITAA 1997 in this income year.

Continue to study and improve guitar playing to allow for performances in bands, studio work and as part of personal performances. | Continue to develop performance skills and stage craft related directly to live performance. | Improve song writing capability to allow collaboration and increase income through royalties related to song writing. | enable you to get employment, | enable you to obtain new employment, or | open a new income-earning activity (whether in business or in your current employment). | devoting all of your time while overseas to the advancement of your knowledge relevant to your work, | the study is undertaken while you are employed in the relevant role, and | the study was not recreational or general in nature, but rather showed a particular special circumstance to differentiate it from mere recreational satisfaction.