Private ruling: Self-education expenses
Date of advice: 11 July 2018
Published: September 2018
Ruling period: Year ending 30 June 20xx
Date scheme commenced: 1 June 20xx

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

Relevant facts and circumstances: You were employed in a field of information technology. You undertook studies in Information Technology. The course you have undertaken improved your skills and knowledge in your employment. In addition, the subjects you undertook in the course expanded your knowledge in areas relevant to your employment position. You have incurred course fee expenses. You resigned from your employment shortly before completing the course of study as you wanted to focus and complete the remainder of your studies. You advise undertaking the course improved your knowledge in relation to your previous employment as a web developer.

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

Reasons for decision: Summary: Self-education expenses generally fall for consideration under the general deduction provision, 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. As a broad guide, you incur an outgoing at the time you owe a present money debt that you cannot escape (Taxation Ruling TR 97/7 Income tax: section 8-1 - meaning of 'incurred' - timing of deductions ). Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business , provides that 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). In some cases, a deduction will still be available where employment ceased after commencing a course of self-education. In AAT Case Re Thomas and FCT [2015] AATA 687; (2015) 100 ATR 235 , a bank employee worked as an investment adviser. He commenced a $47,000 MBA course in Paris but was made redundant after paying the first instalment of $7,000. The AAT found that the balance of the course fees was not deductible because the taxpayer was not definitively committed to paying the fees at the time his employment ceased and therefore the expenditure was not “incurred” before his employment ended. The AAT commented, however, that the fees would have been deductible if the taxpayer had incurred the liability while still employed. Therefore, provided there was sufficient connection between your course of self-education and your income earning activities at the time the expense was incurred, you will be entitled to claim a deduction for your self-education expenses. | Detailed Reasoning - Application to your circumstances: In your case, it is accepted that the course you undertook will maintain or enhance the skills that are required in the performance of your employment duties at the time the expenses were incurred. Therefore, your self-education expenses are deductible under section 8-1 of the ITAA 1997.