Private ruling: self education expenses
Published: January 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

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

Relevant facts and circumstances: You are employed full time as an academic Your employment duties are § teach undergraduate engineering courses, as required § undertake research and publish research papers in your area of expertise § apply for research grants § supervise undergraduate student projects in your area of expertise § supervise postgraduate student projects in your area of expertise § administration duties, as required, such as giving course advice to students. You have undertaken a specific course. You submit that the course will help you in your employment as academic, in particular mentoring honour students. The employer has provided no support towards the course.

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

Reasons for decision: Summary: Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature. It is a long standing principle that a taxpayer does not satisfy section 8-1 of the ITAA 1997 merely by demonstrating a casual connection between the expenditure and the derivation of income. What must be shown is a closer and more immediate connection. The expenditure must be incurred in gaining or producing your assessable income ( Lunney v Commissioner of Taxation (1958) 100 CLR 478). These principles have been affirmed by the High Court in Commissioner of Taxation v Payne [2001] HCA 3. Taxation Ruling TR 98/9 discusses the application of the deductibility tests on the issue of self-education expenses. In practice, the following principles do not always operate on a mutually exclusive basis. It is always necessary to have regard to the words of section 8-1 of the ITAA 1997 and apply them to the facts. Firstly it considers whether the expenses are incurred in the course of gaining or producing assessable income, ie. the nexus between the expense of the course of study and the income. The next test is whether the course of study will objectively lead to an increase in income from those same activities, not from different employment. Where 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. The cost of self-improvement or personal development courses is generally not allowable. In light of the two tests above, what needs to be fully considered is whether the undertaking of a course on property development would contribute to the maintenance or enhancement of the skills and knowledge required in your employment as an academic. Your employment duties include teaching undergraduate courses, undertaking research and publishing research papers and carrying out administration duties. We consider that it is from these duties that you gain or produce your assessable income and that any outgoing or expenses incurred must directly relate to your duties. Your current position requires no specific teaching skills or qualifications in property development. There is no mention in your employment duties of any roles or duties related to property development. In your situation it is considered the nexus between the knowledge gained and the knowledge required in your current employment to be too tenuous. Whilst we acknowledge that you believe some of the topics covered by the course may assist you in your mentoring of honours students the benefit gained in relation to your overall employment duties is insufficient for the expenses to qualify as deductible self education expenses. In summary the education expenses you incurred in relation to your property development course are not incurred in gaining or producing your assessable income and therefore are not an allowable deduction under section 8-1 if the ITAA 1997.

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