Private ruling: Self-education expenses
Published: January 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for your self-education expenses? | A1: Yes.

Relevant facts and circumstances: You are employed in a management position. During your probation period you found yourself in a position where you needed to improve your skills to perform your day-to-day tasks. You began a business course. You must perform home studies and attend in-person training. Part of the program offers a dedicated study trip where you attend courses at different business schools and you visit different private and public institutions. You started the course to enhance your knowledge, allow you to grow in the organisation and improve your earning potential. Your employer is fully supportive of the training and has allowed you to take days off for travel and study.

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 or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. 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; (1961) 8 AITR 406). 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 taxpayer's 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 ( FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). In your case, it is accepted that the business course will enhance the skills and knowledge that are required in the performance of your current employment duties. Consequently, the self-education expenses incurred in undertaking this degree have the necessary and relevant connection with the earning of your assessable income. The cost of the course fees, accommodation and travel expenses for your course and the study trip are therefore deductible as self-education expenses under section 8-1 of the ITAA 1997.