Private ruling: Work Related Expenses: Self-Education
Date of advice: 2 October 2017
Published: February 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are your self-education expenses incurred for specific training deductible? | A1: No

Relevant facts and circumstances: You have been employed in the pastoral industry. You were then offered the opportunity to work on a station. The offer to work on this station was verbal but included a pre-condition that you to attain a relevant license to equip you to use station equipment. The license allows you to cover large distances and survey the station property from the air. This allows for more efficient and informed decisions and allows the efficient performance of a wide range of duties. You accepted this offer and undertook the training and now hold a relevant license. You are not qualified as a commercial pilot. If you had not acquired the licence you would not have continued being employed in the offered role.

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. The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 if: ● a taxpayer’s income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge ( FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn’s Case); or ● 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 ( FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 ( Hatchett’s Case). Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, self-education expenses will not be deductible if the study is intended to: ● enable you to get employment ● enable you to obtain new employment, or ● to open up a new income-earning activity (whether in business or in your current employment). Paragraph 48 of TR 98/9 refers to the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541. That case established that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. The expenses would be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. In your case, you commenced studying for your relevant license after you were employed as a manager. Obtaining a licence was a pre-condition to enable you to obtain employment as a manager. Therefore, the course cannot be said to have been undertaken to improve or maintain a specific skill or knowledge in a current income earning capacity, as the study provides you with a qualification and skills that you did not previously have or use at all in any previous employment. The essential character of the expenses is that they were incurred to enable you to obtain employment as a station manager. The self-education expenses have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.