Private ruling: Self-education expenses
Date of advice: 12 November 2015
Published: November 2015
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a claim deduction for course fees incurred under a FEE-HELP loan? | A1: No.

Relevant facts and circumstances: You are currently employed. Your previous role was within the same organisational unit until you were promoted into your current role. You have submitted profile for your current position. You have submitted a letter from your current supervisor in support of your claims. You are currently completing a course as a part-time student. You are a full-fee paying student. You are expecting to complete the course in the 2015-16 financial year. The course fees are paid under the FEE-HELP system.

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 or are necessarily incurred in carrying on a business for the purpose of 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. A number of significant court decisions have determined that, for an expense to satisfy the tests outlined in section 8-1 of the ITAA 1997: • it 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 (1958) 100 CLR 478); • there must be a connection between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v FC of T (1949) 78 CLR 47) • it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344; FC of T v Hatchett 71 ATC 4184). Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. 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). 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, TR 98/9 states that 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). The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. They are incurred in getting, not in doing, the work which produces the income (High Court decision in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). 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. Whilst it is acknowledged that undertaking this course would provide some benefit to you in your general employment, as demonstrated by your promotion - your main income earning activity is not in the field of your study. The course of study is too general in terms of your current or previous income earning activities. It follows that in your situation; it is considered that there is an insufficient connection between the course of study and the activities performed in your current employment. It is the Commissioner's view that this course of study will provide you with the opportunity for greater remuneration in a new income earning activity or new employment after completing the studies. This is the case even if the new employment is with your current employer. Therefore, no deduction can be claimed for self-education expenses as the tests outlined in section 8-1 of the ITAA 1997have not been satisfied | Detailed Reasoning - FEE-HELP: FEE-HELP was introduced by the Commonwealth to provide assistance to students who are not supported by the Commonwealth to pay course fees. If the student meets the requirements for eligibility for a deduction for self-education expenses the whole course fee is deductible. The student is not prevented from claiming a deduction because assistance to pay all or part of the course fee was received under FEE-HELP. Note however; that if the taxpayer's course has no connection with their current income-earning activities then their course expenses would not be deductible under section 8-1 of the ITAA 1997. The fact that the taxpayer may have a loan under FEE-HELP would not change this. Therefore, in your case as there is not a sufficient connection with your current income-earning activity and your studies, the course fees you are incurring would not be deductible.