Private ruling: Self-education expenses
Published: October 2013
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | A1: No

Relevant facts and circumstances: You are employed in sales and operations support. You undertook a tertiary degree provided by the university and studied part-time and expect to complete the course in two years. You have provided details of your employment duties and the course subjects you have undertaken. The course is designed and assist you become an operations manager at your current workplace. The course to date has helped you to have an in depth understanding of the key concepts related to the work you are currently doing and provided a chance in obtaining a better income in your current position as well as your employer giving you more responsibilities. You had an understanding with employer that you undertake the course which would provide you with more knowledge with your current work. You have provided a letter from your employee confirming your increase in salary was in recognition of your increased responsibilities in your present role and skills gained from your studies in the past year. Your employer provides paid leave for study and exams and provides no reimbursements for your course fees. You have incurred course fees, travel and parking expenses for attending the university.

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 or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. A deduction is allowable for self-education expenses if a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60; (1961) 12 ATD 348; (1961) 8 AITR 406). Similarly, 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, a deduction is allowable. 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 taxpayers 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 (FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). Whilst we acknowledge that your employer has provided a letter indicating that you received an increase in salary from 1 July 2013 which was in recognition of your increased responsibilities in your present role and due to the skills gained from your studies in the past year and that some of the subjects studied may have assisted you in your role as sales and operations support it is considered your study course is designed to enable individuals to gain qualifications for Senior Operations management and as such the qualifications you are seeking to obtain are far in advance of the skills you require in your current job. It is considered that an insufficient nexus exists between your duties at the time you undertook the course and the course which you undertook. It is also considered that the course is designed to enable you to open up a new income earning activity (for example as an operations manager) in your current employment and thus the expenses are incurred at a point too soon to be regarded as being incurred in producing your assessable income. As there is an insufficient nexus between the course of self education and your current income earning activities, and the expenses have been incurred at a point too soon 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 under section 8-1 of the ITAA 1997.