Private ruling: Self Education Expenses
Date of advice: 14 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | 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. The Commissioner's view on the deductibility of self-education expenses are explained in Taxation Ruling TR 98/9. According to paragraph 13 and 14 self-education expenses are allowed if: • a taxpayer's income earning activities are based on the exercise of a skill or some specific knowledge, and the self-education course 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 activity in the future. Therefore, provided there is a sufficient connection between your self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However according to paragraph 15 of TR 98/9, no deduction is allowed for your self-education expenses if the study is to: • enable you to get employment • enable you to obtain new employment, or • open up a new income-earning activity (whether in business or in your current employment). This view is supported by the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541, which establishes the principle that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. In your case, although you may gain knowledge and skills from the course that could be of some assistance in your general work, it is not a requirement to undertake your duties. The aim of the course is for those wishing to work in another area. It is considered that there is an insufficient connection between the skills and knowledge required in your duties and the course. Furthermore, it is considered that the study is designed to open up a new income earning activity. As there is an insufficient nexus between the course of self-education and your income earning activities at the time, 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 hold qualifications in your employment field and until recently were employed to work in that area. | You commenced a full-time course of study that you funded yourself. You reduced your working hours. Your employer allowed you to take unpaid leave when needed. You also incurred expenses while doing the study. | You undertook the study to increase your qualifications and to increase your job prospects.