Private ruling: Self-education expenses
Date of advice: 5 June 2017
Published: September 2017
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 your self-education expenses? | A1: No.

Relevant facts and circumstances: You are employed in a position involved in production and planning activities within an industry. You are undertaking a Masters course. You are currently paying your course fees through HECS-HELP. You do not receive any allowance or reimbursement for your study. Your employer has encouraged you to do this course through positive reinforcement of the initiatives you have led as a result of your learnings, however, they have not provided any financial or other assistance. You study, attend exams and plan your course work during your time off from work, occasionally taking annual leave to attend exams.

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. A number of significant court decisions have determined that, for an expense to satisfy the tests outlined in section 8-1 of the ITAA 1997: ● it must have the essential character of an outgoing incurred in gaining assessable income or, in other words of an income-producing expense ( Lunney v FC of T (1958) 100 CLR 478); ● there must be a connection between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v FC of T (1949) 78 CLR 47) ● it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore and Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344; FC of T v Hatchett 71 ATC 4184). 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 taxpayers 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; (1961) 8 AITR 406). However, paragraph 12 of TR 98/9 states that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field or employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. 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. In your case, you are employed and you are undertaking a Masters course. Your current employment position requires skills and knowledge specific to your industry. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties and the course that you have undertaken. While we acknowledge that you may gain some knowledge and skills from the subjects studied that could be of some assistance in your work, when viewed objectively, it is considered that the course of study is too general to have the required connection to your income earning activities and is designed to enable you to open up a new income earning activity. As there is an insufficient nexus between the course of self-education and your current 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.