Private ruling: Self-Education expenses
Published: June 2013
Ruling period: Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2011

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

Relevant facts and circumstances: You first commenced full-time employment as a Centre Leader. You do not have a duty statement for your position but have provided a summary of the duties you undertake in your role as the centre leader. You were later recruited as the Centre leader to work at another centre. Your duties remained the same. You undertook a tertiary degree. The course will be completed in three years. You have provided details of the course subjects. Your supervisor suggested you undertake the course which would broaden your understanding of some clients. You have no other tertiary qualifications prior to undertaking the course. Your employer is supportive of your studies by working your hours around your lectures, study time and exams. This allows you to work fulltime so you are able to pay for your course. Your employer considers that the continuation and completion of your tertiary education is pivotal to your current and future employment and that once you have completed your studies you will receive an increase in income and responsibility. You are not receiving any financial assistance. You have incurred expenses for course fees, books and stationery and the purchase of a laptop.

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 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). Where a course is too general in relation to your current employment duties, the necessary connection between the expense and your income earning activity does not exist and no deduction is allowed. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces their assessable income ( Charles Moore & Co Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344; (1956) 11 ATD 147: (1956) 6 AITR 379 and Federal Commissioner of Taxation v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; (1971) 2 ATR 5570. In your case, you are undertaking tertiary degree. You are employed as a Centre Leader that provides tuition, coaching, and learning experiences. Your duties as a centre leader involve providing leadership support to teachers and learners, assessing new learners, determining programs, maintaining the courses and goals along with interacting with learners and providing feedback. It is considered that there is an insufficient nexus between the course being studied and your current income earning activities. The course you are undertaking is considered to be too general in nature to have a sufficient connection to your income earning activities. Additionally whilst you advised that the course will provide knowledge and skills that may be used in your role as a centre leader, this role does not require specific tertiary qualifications. The degree will provide you with qualifications that are far in excess of the requirements of your current position and the course cannot be said to be sufficiently related to your current employment duties. In FC of T v. Hatchett (1971) 125 CLR 494; 71 ATC 484; (1971) 2 ATR 557, the judge held that expenses incurred by a primary school teacher in relation to the submission of theses to gain a Teacher's Higher Certificate were allowable. His Honour considered that the Certificate expenses were related to the actual gaining of income because possession of the Certificate entitled the taxpayer to move to another pay scale and, therefore, to earn him more money in the future. It also entitled him to be paid more for doing the same work without any change in grade. Similar reasoning was used to allow self-education expenses in FC of T v. Smith 78 ATC 4157; (1978) 8 ATR 518 and in FC of T v. Lacelles- Smith 78 ATC 4162; (1978) 8 ATR 524. Furthermore, in FC of T v Studdert 91 ATC 5006; (1991) 22 ATR 762 , the judge said that an expense normally is allowable if it can be shown to contribute or be likely to contribute to increased income, but noted that such a finding is not a prerequisite for deductibility. Thus provided it is established that the course of self-education will increase your skills or knowledge in relation to your current income-earning activities, there is no requirement that the course will also lead to, or is likely to lead to, an increase in income. There is no relevant connection between your course of self-education and your current income-earning activities. Thus, the course is unlikely to lead to an increase in income from your current income-earning activities. Consequently, the self-education expenses incurred in undertaking your degree do not have the necessary and relevant connection with the earning of your assessable income. Therefore, you are not entitled to a deduction for self-education expenses under section 8-1 of the ITAA 1997.