Private ruling: Self-education expenses
Date of advice: 23 June 2016
Published: August 2016
Ruling period: Year ended 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can you claim deductions for self-education expenses related to your Diploma of Building and Construction qualification? | A1: No.

Relevant facts and circumstances: You currently work as a plasterer. You undertook a Diploma of Building and Construction in order to increase your skills, knowledge and your income earning capacity. The qualification will allow you to work as a building supervisor whose role would be to supervise those working in your current position and also those working in other trades.

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 deductions 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. 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 incurred by an employee or a person in business . In accordance with TR98/9, 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 into the future. If neither of the above tests is satisfied, expenses of self-education will not be deductible if the study is to enable a taxpayer to get employment, to obtain new employment, or to open up a new income earning activity. This includes studies relating to a particular profession, occupation or field of employment in which a taxpayer is not yet engaged., or to a profession, occupation or field of employment not sufficiently connected to one in which a taxpayer is currently engaged. In such situations the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. This is the case even if the taxpayer remains with the same employer or runs the same business. For example, in case Z1 92 ATC 101; AAT Case 7541 (1991) 22 ATR 3549, a public service clerk studying for a law degree later obtained a legal officer position also in the public service. Such expenses of self-education were deemed to be incurred at a point too soon to be incurred in gaining or producing assessable income. Consequently, 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. | Detailed Reasoning - Application to your circumstances: You advise that the Diploma of Building and Construction will allow you to offer your services as a building supervisor. The work of a building supervisor is considered a different income earning activity to that of a plasterer. A building supervisor has much more responsibility and more varied duties. Furthermore, it is considered that the while the knowledge and skills gained from the qualification may be of some assistance in your role as a plasterer, it has only an incidental relevance and limited application to your current income earning activities. This is because the subjects studied will provide you with skills and abilities far in advance of those required in your current role. Therefore, we consider that the study does not have the required connection to your current income-earning activities. Instead, the knowledge, skills and ability you will have gained from your study will assist you in opening up a new income earning activity as a building supervisor. Consequently, your expenses are deemed to have been incurred at a point too soon to be regarded as being incurred in the gaining or producing of your assessable income as a plasterer.