Private ruling: Self-education
Date of advice: 23 August 2023
Published: 9 October 2023
Ruling period: Year ended 30 June 2022 | Year ended 30 June 2023 | Year ending 30 June 2024
Date scheme commenced: 1 March 2021

Ruling: Q1: Are you entitled to claim a deduction for all of the university fees incurred in undertaking a Master of XX course? | A1: No. | Q2: Are you entitled to claim a deduction for a portion of the university fees incurred in undertaking a Master of XX course? | A2: Yes.

Relevant facts and circumstances: On XXXX you commenced a Master of XX course with a university. You have completed or will complete sixteen course subjects. On XXXX, you commenced employment with XXX in role A. On XXXX, you started a new secondment role with the same employer (Role B). Your Role B secondment will cease on XXXX, unless extended by mutual agreement. At the cessation of your secondment you will revert to your substantive position. Your employer supports your aim to complete the course. They provide study leave to complete exams, flexibility to switch between part time and full-time hours depending on your university schedule. Your employer provided a letter which states: " This letter is to confirm that the course undertaken by XX will improve the specific skills and knowledge required in her current role B and is likely to result in an increase in income from employment activities." The cost of each subject module is $XX. The total course cost will be approximately $XX. You are paying for the course fees using the Higher Education Loan Program (HELP). You are not receiving any government allowance to study (including Abstudy, Austudy or Youth Allowance). You are not receiving a taxable bonded scholarship. You expect to complete the course by XXXX.

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, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Application to your circumstances In your case, it is accepted that the Master of XX course will maintain or enhance the skills that are required in the performance of your current Role B. Therefore, as outlined in TR 98/9 you are allowed a deduction for your course fees incurred for self-education under section 8-1 of the ITAA 1997 whilst in this particular role. Applying the current law to your circumstances, you have demonstrated that there is a sufficient connection between some of the subjects of study and your current income earning activities in your Role B. We have identified some subjects as having the necessary nexus to your current Role B. Note that if you cease to be employed in Role B, the subjects may not be deductible. However, only one subject with the necessary nexus will be completed in the eligible period of Role B. If your secondment is extended beyond XXXX, you may be entitled to claim two other subjects if they are completed whilst you remain working in Role B. The other subjects completed during your Role A are not deductible as they were completed before you commenced Role B. We have identified ten subjects as being not deductible as we are not satisfied these subjects have the necessary nexus to your employment. These are strategic subjects are more suitable for managers and leaders. These subject expenses are incurred at point too soon as you are not being employed in a management or leadership role. Please note: we can only apply the course subjects to your Role B as we were able to establish the necessary nexus due to the information contained in the course guide, position description document and the letter from your employer which stated: "This letter is to confirm that the course undertaken by XX will improve the specific skills and knowledge required in her current role B and is likely to result in an increase in income from employment activities." We were not able to establish the necessary nexus in relation to your Role A. We accept that the course may lead to you being generally 'better' at your Role A and that it may broaden your knowledge of the principal areas of your work. However, we consider that you have not objectively shown that there is a sufficient connection between any subjects of the course and your Role A. Whilst we accept that a general link can be made, we do not consider that the course, in its entirety, forms an integral part of your core responsibilities in your Role A.