Private ruling: Self education expenses
Date of advice: 12 February 2018
Published: June 2018
Ruling period: Year ending 30 June 2018.
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you entitled to a deduction for self-education expenses for a course in a Masters and Graduate Diploma in your field of employment? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1936 Section 82A

Reasons for decision: Summary: You are entitled to a deduction for the course fees you incurred for your Masters and Graduate diploma as it is considered that the self-education expenses have the necessary and relevant connection with your current income earning activities. | Detailed Reasoning - 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. Taxation Ruling TR 98/9 (TR 98/9) provides the Commissioner’s view for the circumstances under which self-education expenses are allowable as a deduction. TR 98/9 provides that 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). Similarly, 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, a deduction is allowable. However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; TR 98/9). You commenced a Masters and Graduate Diploma to gain a formal qualification for use in carrying on your income earning activities. In your case, there is sufficient connection between the course you commenced and your current income producing activities. You undertook the program to enhance your existing capabilities, skills and knowledge that are required in the performance of your current employment. Consequently, the self-education expenses incurred in undertaking your course have the necessary and relevant connection with the earning of your assessable income and are deductable under section 8-1 of the ITAA 1997. | Detailed Reasoning - Additional information: In certain circumstances you may have to reduce your allowable self-education expenses by $250. However you may have other types of expenses some of which are not allowable as a deduction that can be offset against the $250 before you reduce the amount you can claim for allowable expenses. For more information on how to work out your self-education expenses, search for Quick Code (QC) 31970 at ato.gov.au .

Relevant facts: You are an Australian resident for tax purposes. | You commenced tertiary studies in subjects related to your field of employment. | You graduated with two Bachelor of Laws degrees. | You have worked with your current employer for over 12 months. | You are undertaking a course in a Masters and Graduate diploma in your field of work. | The course is undertaken in order to further your skills and knowledge which you currently use in your present role. | You are not completing the course to gain new employment in your field of work. | A professional tertiary college has accepted that your current work role constitutes suitable practical experience and have accordingly provided you with credit for other additional units that otherwise you would have been required to undertake to successfully complete the course. | Further studies in your field of work maintain and improve a highly desirable skillset for your role and are likely to lead to promotion and an increase in income. | At least 80% of members of the team in which you work hold the qualification for which you are studying. | To maintain your practising certificate you are required to undertake continued professional development (CPD). | The units you are studying are very close to reflecting your work functions, where you are involved in highly complex transactions. | The course has allowed you to effectively perform your duties in your current role, as well as to improve.