Private ruling: Work related expenses – self education
Date of advice: 20 March 2019
Published: May 2019
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

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

Relevant facts and circumstances: You are employed as a full time store manager. Some of the duties in your role as a store manager include. ● To manage the store’s sales performance, cost control and to increase the profitability of the business ● The development, coaching, performance and training of all team ● Maximise profit by increasing customer engagement and maximising every opportunity. You are undertaking a Masters of Business Administration through a University. You believe this degree will likely lead to a promotion into more senior leadership roles/executive roles such as an area manager role where you will lead and manage many retail sites. There is no express encouragement from your employer to do this course nor have they provided any financial or other assistance. Your study, attend exams and plan your course work during your time off from work. You will not be receiving Austudy, ABSTUDY or Youth Allowance; nor a receiving a taxable bonded scholarship. You will not be receiving an allowance or being reimbursed by anyone for expenses incurred in relation to the study. Costs to be claimed:- ● Course fees ● laptop. ● printer MFC ( to be purchased) ● pro rata internet and stationary required for the course

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

Reasons for decision: Summary: Where a course is too general in relation to your current employment duties, the necessary connection between the expense and your income earning activity does not exist and no deduction is allowed. Detailed reasoning 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 & 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 as a store manager and you are undertaking a Masters of Business Administration (Leadership). 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.