Private ruling: Self education expenses
Date of advice: 23 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you claim a deduction for the repayment of loans used to fund your 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 sets out the circumstances in which self-education expenses are allowable as deductions, and states that these expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities. This ruling also states that a deduction is allowable for interest incurred on borrowed monies where the funds are used to pay for self-education expenses associated with a course of education, which enables a taxpayer to maintain or improve his or her skill or knowledge or is likely to lead to an increase in income from the taxpayer's current income earning activities. However, a deduction is not allowable for self-education expenses if the study is designed to enable a taxpayer to get employment, to obtain new employment, or to open up a new income earning activity (whether in business or in the taxpayer's current employment). The expenses come at a point in time too soon to be regarded as being incurred in gaining or producing assessable income. Paragraph 117 and 118 of TR 98/9 also provides the following example which is similar to your circumstances : After completing his secondary education, Alex studied commerce as a full-time student at a private university. He borrowed $30,000 in 1995, repayable over 5 years, and used the funds to pay course tuition fees. He completed his degree the following year and obtained employment with an accounting firm in early 1997. No deduction is allowable for interest incurred on the loan. The funds borrowed were not used for an income-producing purpose, but related to a course of study undertaken by Alex before he obtained his current employment. Accordingly, there is not a sufficient connection between the interest expense and Alex's current income-earning activities. In your case, you obtained a loan to assist with the funding of your self-education expenses whilst studying at the university. Although you still had this loan when you started your current income earning activity, the borrowed funds were not used for an income-producing purpose, but related to a course of study that you undertook before you obtained this employment. Accordingly, you are not entitled to a deduction for your loan outgoings under section 8-1 of the ITAA 1997. In addition, repayments of the capital amount of a loan are outgoings of a capital nature and therefore are also not deductible for this reason.

Relevant facts: You undertook a course of study at university. | You obtained a loan in order to pay your university fees. | You used this loan to fund your self-education expenses that you could not afford at the time. | You obtained the loans and undertook the study prior to commencing your current income earning activity. | The employment you were engaged in while studying at university did not have any relationship to your course of study during that time. | The previous study undertaken at university directly relates to your current income earning activity. The course of study has given you skills which are required to perform your current job efficiently.