Private ruling: Work Related Expenses: Self-Education
Date of advice: 5 December 2018
Published: March 2019
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Am I entitled to a deduction for course fees for the subject “Subject 1” whilst studying a Master’s Degree? | A1: Yes | Q2: Am I entitled to a deduction for course fees for the subject “Subject 2” whilst studying a Master’s Degree? | A2: Yes | Q3: Am I entitled to a deduction for course fees for the subject “Subject 3” whilst studying a Master’s Degree? | A3: No

Relevant facts and circumstances: You completed a Graduate Certificate of X in summer 20XX and commenced a Master’s Degree. You elected to study – ● Subject 1 ● Subject 2 ● Subject 3 Your fees were paid under the HELP scheme. At this time you were working part-time at a not-for-profit organisation. This part-time arrangement allowed you to improve your knowledge of the subject area and you were encouraged to study as it would improve your work performance. While working you were reporting directly to the Board and placed in charge of setting strategy, managing advocacy efforts as well as day-to-day management of the organisation; including development and implementation of internal policy. Your duties included a number of duties relating to communications and political issues. Your studies in Subject 1 were directly related to your then duties. Your studies assisted you by altering and improving your approach to communications. Accordingly you found this subject directly related to your duties. Similarly, Subject 2 helped you to understand how emotions can be used by advocates and politicians to set agendas, which was directly relevant to your work. You used this knowledge to assist in the development of campaigns for your employer. Accordingly you found this subject directly related to your duties. During your study you were promoted and increased your work hours and income. However, due to significant stress and for personal reasons you did not complete your studies for the year, despite incurring the normal costs of study. Once you ceased studying you remained at the non-for-profit organisation but then received a new position at the XYZ Board in summer 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 s ection 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business 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). Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education. Paragraphs 33 and 34 of TR 98/9 are particularly relevant – 33. The High Court of Australia has indicated that the expenditure 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 ; Hayley v. FC of T (1958) 100 CLR 478 at 497-498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435). 34. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91). Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. The essential character of the expenses you wish to claim is that they were incurred to enable you to enhance your ability to perform your current employment and, possibly, to allow you to increase your income by enhancing your skills and your ability to perform your current duties. It is considered that the qualification you studied has sufficient connection to the skills or knowledge used in your then current income earning activity as to justify deductibility for this study for some of the subjects studied. Based on the evidence available in support of this application it is considered that one of the subjects you studied has insufficient connection to the skills or knowledge used in your current income earning activity. That is “Subject 3”. Equally, it is considered that two of the subjects you studied have sufficient connection to the skills and knowledge used in your income earning activity to justify a deduction. These subjects are – “Subject 1” and “Subject 2”. These subjects provide learning outcomes that are arguably directly connected to your employment duties at the time of study. Consequently, your self-education expenses for the two subjects deemed to be connected to your employment are deductible under section 8-1 of the ITAA 1997.