Private ruling: Self-education
Published: November 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2011

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


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 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. The decision in FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 also supports the Commissioner's view that no deduction is allowable 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. This would include studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. In the Administrative Appeals Tribunal case Pujara v. Federal Commissioner of Taxation (2003) AATA 331 ( Pujara's case ), the taxpayer was enrolled in a Masters of Business Operations Management course at the University of Western Sydney. The purpose of the course was to provide advanced theoretical and practical skills in managing quality in a business organisation, including logistics management and statistical process control. The taxpayer was also employed part-time as an assembler store person for a pharmaceuticals company. His duties included the manual assembly of orders, updating records of bulk stock and assisting with stock distribution. In denying the taxpayer a deduction for his self education expenses, the Tribunal determined at paragraph 19: the routine nature of the applicant's activities was such that the necessary skills and performance could be maintained without further training. Objectively, the new information and learning he acquired through the Masters degree was at a higher level than he required for his position. It would not improve or tend to improve his proficiency in a relatively junior role. The "perceived connection" between the Masters degree and the applicant's activities as an assembler store person is missing. The Tribunal is not satisfied, therefore, that the expenditure on self education during the 1998-99 year of income was incidental and relevant to gaining or producing his assessable income. The tribunal also determined that the taxpayer's course of education was unlikely to lead to an increase in this income from his current employment. Your case can be compared with Pujara's case as the routine nature of your duties could be maintained without further training. There is an insufficient connection between the skills and knowledge required in your duties and the course that you have undertaken as the study you are undertaking is focused toward management or marketing. It is considered that the course will open up a new field for you. As there is an insufficient nexus between the course of self education and your income earning activities, 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.

Relevant facts: You are employed as a casual employee. | You are undertaking a Diploma and Bachelor degree. | Another eight subjects will be undertaken in 2014. However the subjects are unknown at this stage. | Your employer stated that the course is a pathway to specific management.