Private ruling: Self education expenses
Published: December 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2012

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


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 taxpayers 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). The intention or purpose of a taxpayer can be an element in determining the essential character of the expense. Although your studies may help you in your current duties, the skill or knowledge acquired in undertaking your masters goes beyond that required in your current position. Viewed objectively, your intention in undertaking the course is not to improve your capacity to carry out your part-time employment but to obtain qualification to pursue your chosen career. The course is essentially a means for you to obtain employment in your field of study. Furthermore, while we accept that obtaining your qualification will lead to an increase in your future income, this increase in income would be a consequence of a new income earning activity, as opposed to your current employment activity. Thus the expenses are incurred at a point too soon to be regarded as being incurred in producing your assessable income. As the expenses have been incurred at a point too soon, the self education expenses associated with the course are not incurred in earning your assessable income. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.

Relevant facts: You are currently employed as an assistant in a particular industry | You are undertaking further studies in order to obtain new employment as a registered professional in your particular industry.