Private ruling: Self-education
Date of advice: 31 January 2019
Published: May 2019
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20ZZ
Date scheme commenced: 1 July 20XX

Ruling: Q1: Am I entitled to a deduction for course fees for all units except ‘Unit X’ whilst studying a degree? | A1: Yes

Relevant facts and circumstances: You are a senior teacher at a secondary/high school where you also teach Subject B, Subject C and Subject D. You estimate your workload as – ● Subject A 50% ● Subject B 30% ● Subject C 10% ● Subject D 10% You are studying to further your studies and as part of your ongoing professional development. You believe that a relevant degree will allow you to become eligible for promotion into a higher level teaching role. This is a more senior position that recognises a teacher’s above average qualifications and which qualifies such teachers’ to earn a higher income. While you were studying you also lobbied your school to reintroduce Subject A; which resulted in that subject being reintroduced for the 20ZZ academic year. The purpose of your study was to up-skill to meet the demands of your employment whilst also allowing you attain the role of a higher level teacher. You have provided a link for each unit you studied in your degree to establish a nexus between that unit and the Senior Syllabus established for Subject A for 20ZZ. The unit ‘Unit X’ is designed to support your transition from university to professional work. It consolidates your knowledge and skills by forcing you to respond to real-world problems and developing your professional reflection skills. Students studying this unit undertake a virtual internship. This unit is designed to assist a transition into professional practice.

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 and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction. 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). Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education. Paragraphs 33 and 34 of TR 98/9 are particularly relevant: 33. The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense ( Lunney v. FC of T ; Hayley v. FC of T (1958) 100 CLR 478 at 497-498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income ( Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435). 34. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91). Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case. The essential character of the expenses you wish to claim is that they were incurred to enable you to enhance your ability to perform your current employment and, possibly, to allow you to increase your income by enhancing your skills and your ability to perform your current duties. It is considered that the qualification you studied has sufficient connection to the skills or knowledge used in your then current income earning activity as to justify deductibility for this study for some of the units studied. Based on the evidence available in support of this application it is considered that one of the units you studied has insufficient connection to the skills or knowledge used in your current income earning activity. That unit is ‘Unit X’. This unit is a practical virtual internship which is designed to support the transition from university to professional practice. This unit has little application to the high school syllabus you teach and therefore it is considered that insufficient evidence exists to establish a nexus between this unit in your degree and the syllabus you teach. All other units you studied in your law degree provide learning outcomes that are arguably directly connected to your employment duties at the time of study. These connections are documented in the ‘link to employment’ which you provided to link units in your degree to relevant units in the syllabus for Subject A which you teach. Consequently, your self-education expenses for all units in your law degree, except the unit ‘Unit X’, are connected to your employment and their costs are deductible under section 8-1 of the ITAA 1997.