Private ruling: Self Education Expenses
Date of advice: 26 November 2015
Published: January 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for expenditure on self-education studies being undertaken? | 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 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. To be deductible under this section an expense must have the essential character of an expense incurred in gaining or producing assessable income or, in other words, of an income-producing nature. Taxation Ruling TR 98/9 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. 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). 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. Although you may gain knowledge and skills from the course that could be of some assistance in your work, the predominant focus of the course is for those working in relationship counselling. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties as a teacher and the course that you intend to undertake. As there is an insufficient nexus between the course of self education and your current income earning activities, 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.

Relevant facts: You are currently employed as a part-time teacher teaching children. | You work with children from families where the parents are separated or divorced and this has a negative effect on the child and you have to deal with the issues the children bring to the classroom. | Parents are discussing their personal problems with you and you consider this is part of being the child's teacher. | You are looking for more skills to be able to provide appropriate professional feedback and be able to care for the parents and the children. | You are intending to study a counselling course that would be recognised by the appropriate authority. | You have not decided how you will pay for the course. You will also be purchasing books and other study material. It will not be necessary for you to take time off work as you are able to work around your part-time hours. Your employer has agreed to change your work days to accommodate your study time. | You have considered starting a support group once you have completed your studies.