Private ruling: self education expenses
Published: December 2011
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you entitled to a deduction for expenses incurred to undertake a finance course designed for banking executives? | A1: No.

Relevant facts and circumstances: A few years ago while working at a bank, you commenced a finance course that was designed for banking executives. About a year after commencing the course, you ceased working for the bank and commenced working as general manager for a company that was not involved in the finance industry. During the 2009-10 financial year, while in the employment of the company, you completed the final component of your finance course. You incurred fees to undertake this component of the course. The subjects studied that you consider related to your role at the company included negotiation, leadership and communication, and strategic execution.

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 details the circumstances under which a deduction is allowable for self education expenses. Self education expenses are an allowable deduction if a taxpayer's income earning activities are based on the exercise of a skill or specific knowledge and the subject of the self education enables the taxpayers to maintain or improve upon that skill or knowledge (paragraph 13 of TR 98/9). If the study of self education objectively leads to, or is likely to lead to an increase in a taxpayer's income from their current income earning activities in the future, a deduction is allowable (paragraph 14 of TR 98/9). However, no deduction is allowable for self education expenses if the study is to enable a taxpayer 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). This includes studies that relate to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Case V132 88 ATC 842 concerning a librarian studying computing confirms that it is not sufficient for a taxpayer to claim their studies will enable them to perform their duties more efficiently and enhance promotional prospects, where it is felt that the studies are not essential to their present duties and effectively open up a new field of employment. You are not currently employed in the field in which you are undertaking study. Therefore, your study is not to enable you to maintain or improve skills or knowledge in a profession you are already engaged in. While it is recognised that some general aspects of your study may assist you to perform some of your duties as a general manager, the skill or knowledge acquired as a result of undertaking the finance course goes beyond that required in your current employment. There is an insufficient connection between your studies and your income earning activities. It is considered that your self education expenses are not incurred in the course of gaining or producing the income you derive from your current employment. Consequently, your self education expenses are not deductible under section 8-1 of the ITAA 1997

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.