Private ruling: Deductibility of self education expenses
Date of advice: 24 October 2017
Published: March 2018
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Are you entitled to a deduction for self-education expenses relating to completing an Overseas Training Course? | A1: No.


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

Reasons for decision: Summary: Work-related 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 of a capital, private or domestic nature. The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of 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 ( FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn’s Case); 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 ( FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 (Hatchett’s Case). Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However , paragraph 15 of TR 98/9 explains self-education expenses will not be deductible if the study is intended to : ● enable you to get employment ● enable you to obtain new employment, or ● to open up a new income-earning activity (whether in business or in your current employment) The decision in FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 supports the Commissioner's view that no deduction is allowable 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. This would include studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. If 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 types of expenses related to self-education which are considered to be allowable under section 8-1 of the ITAA 1997 include: ● course or tuition fees of attending an educational institution (including student union fees, but excluding Higher Education Loan Program (HELP) payments) ● the cost of text books ● airfares, accommodation and meal expenses incurred on a study tour. | Detailed Reasoning - Application to your circumstances: You stated that you are a qualified medical practitioner from Country A. You are working as an assistant. You are claiming self- education expenses for the cost of a Five Week Comprehensive Program that will enable you to register as a medical practitioner in Country B. The expenses were incurred at a point to soon. The expenses were not incurred in gaining or producing assessable income from your employment as an assistant. The expenses were incurred as a prerequisite to commencing a new income earning activity. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions. | Relevant facts: You are a registered medical practitioner in Country A. | Your Country A qualifications are not recognised to allow you to practice in Country B. | To practice as a registered practitioner in Country B you needed to complete an Overseas Training Course – Five Week Comprehensive Program. | You are currently employed as anl assistant in Country B.