Private ruling: Self-education expenses
Date of advice: 23 December 2015
Published: March 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for your self-education expenses? | A1: No.

Relevant facts and circumstances: You are a professional with your own business. You are considering undertaking a degree in your profession so that your business can increase the primary health care that it provides.

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 discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. The decision in FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 supports the Commissioner's view that no deduction is allowable if the study is designed to enable a taxpayer to open up a new income earning activity, whether in business or in the taxpayer's current employment. This would include studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. You are a professional and currently operate your own business. The course you are considering is designed to produce physicians and therefore the knowledge, skills and qualifications that the course will provide go well beyond those required in your current income earning activities. Consequently it is considered that there is an insufficient connection between the skills and knowledge required in your current income earning activities and the course. Also, it is considered that the expenses will be incurred in order to expand your business into additional health fields rather than in gaining or producing your assessable income from your current income earning activities as a professional. As the study is designed to enable you to open up a new income earning activity and there is 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. Additionally, while we acknowledge that the course may benefit your business in the future by being able to increase the primary health care provided within the business, the expenses will be incurred at a point too soon to be regarded as having been incurred in gaining or producing the additional assessable income that is anticipated to result. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.