Private ruling: Self Education
Date of advice: 11 October 2016
Published: December 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 01 July 2015

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

Relevant facts and circumstances: • you stopped working full-time. • You now work casually, one day a week. • You are completing a course. • Your employer is seeking to expand its core source of work.

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

Reasons for decision: Summary: In order for self-education expenses to be allowable as a tax deduction, they must meet the requirements of section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9.In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 if: • a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge; or • 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 their current income-earning activities in the future. A deduction is not allowable for self-education expenses if the subject of self-education is designed to get employment, to obtain new employment or to open up a new income-earning activity. TR 98/9 provides the following examples of taxpayers with casual income who incur self-education expenses: 53. Example: After finishing her final year of school, Sarah enrols in a full-time fashion photography course at a technical college. She is supported by her parents during her studies and does not receive any government assistance, but does some casual sales work on weekends. 54. Sarah cannot claim the costs associated with the course against her casual work income because her study costs were incurred at a point too soon to be regarded as incurred in gaining or producing income from her future employment in the fashion photography industry. 57. Example: Shannon, who is undertaking a 4 year university degree in mining engineering, take a job as a casual employee with a mining company during the end of the year holiday period. It is the company's policy to take only students who are pursing relevant studies. Shannon is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon. This issue was also considered in Gupta v. FC of T 2002 ATC 2319; (2002) 51 ATR 1205 (Gupta). In that case the taxpayer commenced a Bachelor of Computer Science degree, and subsequently began casual work at the university's School of Computing and Information Technology as a computer laboratory assistant. The Administrative Appeals Tribunal held that the essential character of the expenses was to qualify the taxpayer through obtaining his degree so that he could get ahead within the Information Technology industry to a more highly paid position. They accepted that his experience gave him the knowledge necessary for the casual university work, which was relatively low-skilled and routine. They found that on completion of the degree, however, the taxpayer would have acquired more highly developed skills, qualifying him to undertake more responsible and demanding work than previously. It was held that the expenses were not incurred in gaining or producing the taxpayer's assessable income from casual work at the university that income was merely incidental to the studies. The expenses were incurred in getting future work, and they came at a point too soon. Your situation can be likened to both Gupta and the above examples from TR 98/9. Whilst undertaking your course may assist in your casual employment, it will allow you to obtain new employment or to open up a new income-earning activity. Your self-education expenses are not considered to have been incurred in earning your assessable income. You are not entitled to claim a deduction for your self-education expenses as they have not been incurred in gaining your assessable income.