Private ruling: Self-education expenses
Date of advice: 22 December 2020
Published: March 2021
Ruling period: Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 July 2020

Ruling: Q1: Can you deduct the cost of course fees? | A1: No | Q2: Can you deduct the associated travel, meal and accommodation expenses? | A2: No | Q3: Can you deduct the cost of the application fee for the previous course for which you were approved? | A3: Yes

Relevant facts and circumstances: You are employed as a manager with a multi-national public company. You are a permanent full-time employee and commenced this position several years ago. You have chosen to study a Master of Studies in XXXX at university. You have not yet enrolled in the course. The course is conducted part-time over 1-2 years via a mix of online learning and residential blocks. You have commenced the application process and paid the initial application fee. Due to COVID, the next steps of the application/interview process have been delayed until next year. You expect to commence the course next year. The cost of the course is approximately $XX, XXX. You will fully fund the course fees, travel and accommodation. You will use your regular leave entitlements to complete the course and once these are exhausted, your employer will grant you leave without pay for study purposes.You intend to remain in the same scope of work and with the same employer. By undertaking this course, you hope to become more proficient in your current role and receive an increase in your salary. The course consists of several core subjects and some electives. The course information on the university webpage states that: The core subjects provide a broad set of courses where each one offers the essential knowledge everyone wanting to enter the general field of employment should have, regardless of their industry or background. You have provided an outline of each subject and your view on how the subject may relate to your current employment You previously received a favourable private ruling decision in relation to studying another course. You were not successful in your application to study at the particular university to undertake this course but wish to claim the amount of the application fee as a deduction in the relevant income tax return.

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

Reasons for decision: Summary: The tuition fees and associated expenses are not deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).They do not have the relevant nexus to your current income-earning activities.Although you have provided your view on how they may relate to your current employment, you have not demonstrated that the expenses will or may objectively lead to an increase in income from your current work activities.In addition, it's uncertain how the expenses will result in the maintenance or improvement of a specific skill or area of knowledge upon which your current income-earning activities are based. As you have previously received a favourable private ruling in relation to studying another master's course, the cost of your application fee for that course is deductible under section 8-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Self-education 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. Taxation Ruling 98/ 9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (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). Paragraph 42 of TR 98/9 states: 42. 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 cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances. In Case Z42 92 ATC 381; AAT Case 8419 (1992) 24 ATR 1183, a senior newspaper journalist, whose duties involved interviewing people for feature articles and making presentations to potential advertisers, was allowed a deduction for the cost of a speech course because it was incurred in maintaining or increasing his ability in his current employment and therefore was necessarily incurred in carrying on that employment. Case U109 87 ATC 657 demonstrates the principle that just because expenditure may lead to the taxpayer being 'better' at their employment does not necessarily mean that the expenditure is deductible. In that case the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He incurred expenditure to undertake a 17-day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites and attended a geological congress. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The Administrative Appeals Tribunal (AAT) concluded that the fact that the taxpayer may have been a better teacher after the travel was not enough to demonstrate a sufficient connection between the travel and their income earning activities and that the expenditure was not deductible. Paragraph 14 of TR 98/9 states: 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, the self-education expenses are allowable as a deduction. | Detailed Reasoning - In your situation: You have advised that this course will provide you with skills and knowledge to gain further knowledge and expertise in your current role and you hope it might lead to earning a higher salary in the future. However, the core subjects in the master's course are general in nature and as stated in the course description, they provide a broad set of subjects where each one offers the essential knowledge every 'type of person'should have, regardless of their industry or background. To be deductible as a work-related self-education expense, it is necessary that a course allows you to improve a particular skill that you currently use in your work. If skills obtained are too general and not directly applicable to your current position, the requisite nexus will be absent. In addition, if the skills developed open up a new avenue of income earning activity, it will be considered a point too soon to qualify for a deduction. To determine whether the tuition fees are deductible it is necessary to look at each subject. You have provided information about how the subjects will assist you. You have also provided information about the descriptions of each subject. As stated, the five subjects that form the core of the master's course provide a broad set of subjects that a particular 'type of person' requires. Although the course does also provide for the development of individuals inside organisations, the knowledge gained is considered general in nature and not necessarily required in your current role. In your situation you have not demonstrated that the skills acquired in the master's course will or may objectively lead to an increase in income from your current work activities. On analysis of the supplied information, there is insufficient information to show the required nexus between any of the subjects and your current work activities. Therefore, the tuition fees are not deductible. It is acknowledged that the subjects within this course will provide some benefit to you in your current work activities. However, the fees are incurred both at a point too soon in relation to their area of study and do not have a sufficient nexus with your current income-earning activities. | Detailed Reasoning - Course you previous received a private ruling for: As you have received a favourable private ruling in relation to this course, the application fees in relation to that course are allowable as a deduction.