Private ruling: Self-education expenses
Date of advice: 15 April 2016
Published: June 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Are you entitled to a deduction for course fees, textbooks and stationery in relation to a course of study? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are employed as a full-time research officer. You perform and design research along with administrative duties. One of your main administrative duties is securing research funding from external funding bodies. You will study a graduate diploma course then transfer to a Masters course. You are undertaking the course to improve your skills and knowledge in people management, financial management and research innovation and commercialisation. You are not receiving any reimbursements for these courses and you are a full fee paying student.

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 circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. In addition, 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, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. 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 expenses and the income-earning activity does not exist. The courses you are undertaking will increase your current skills in your current employment. The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current position and the graduate diploma and the master courses. Accordingly, you are entitled to a deduction for the course fees, textbooks and stationary associated with the study. Taxation Ruling TR 98/9 states at paragraph 25 that, "If self-education expenses are allowable under section 8-1 but also fall within the definition of 'expenses of self-education' in section 82A [of the Income Tax Assessment Act 1936 (ITAA 1936)], the section operates to limit the amount of expenses otherwise allowable under section 8-1. The Ruling provides guidance in regard to the expression, 'expenses of self-education' as being expenses that are 'necessarily incurred' in connection with a prescribed course of education. Compulsory and unavoidable expenses, 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'. These include expenditure on fees, books and equipment to the extent that they are incurred in pursuing a prescribed course of education. (At paragraphs 26 and 124). As the fees you incur in undertaking the courses fall within the definition of 'expenses of self-education' in section 82A of the ITAA 1936, only the excess of your self-education expenses over $250 may be considered for deduction under section 8-1 of the ITAA.