Private ruling: Self-education expenses
Date of advice: 6 October 2016
Published: December 2016
Ruling period: Financial year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will you be able to claim a deduction for the self-education expenses of your course? | A1: No.

Relevant facts and circumstances: You attended a short course in 20XX. You paid for the course fees up-front. You were unemployed at the time of undertaking the course. You state that the knowledge gained in the course allowed you to gain new employment.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Self-deduction expenses are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where they have a relevant connection to your current income-earning activities. 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). Taxation ruling 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business sets out the circumstances in which self-education expenses are allowable as deductions to individuals. A deduction is allowable for self-education expenses if the taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge. 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 expense and the income-earning activity does not exist. It is important to note that a deduction is not allowable for self-education expenses if the subject of self-education is designed to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment) ( FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541) (Maddalena's Case). Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. TR 98/9, at paragraph 53-54, gives an example illustrating the application of the principle established by Maddalena's Case. 53. Example: After finishing her final year of school, Sarah enrols in a full-time fashion photography course at a technical college. She is supported by her parents during her studies and does not receive any government assistance, but does some casual sales work on weekends. 54. Sarah cannot claim the costs associated with the course against her casual work income because her study costs were incurred at a point too soon to be regarded as incurred in gaining or producing income from her future employment in the fashion photography industry. The Commissioner considers that your self-education expenses were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. The course was designed to obtain new employment, not to derive income from your current employment. A deduction is not allowed for the cost of the course.