Private ruling: Deductibility of self education expenses
Date of advice: 23 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a deduction for self-education expenses related to a Certificate in Commercial Cookery? | A1: No.


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

Reasons for decision: Summary: Work-related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature. The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 if: ● a 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 ( FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn’s Case); or ● 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 their current income earning activities in the future ( FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 ( Hatchett’s Case). Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. However, paragraph 15 of TR 98/9 explains self-education expenses will not be deductible if the study is intended to: ● enable you to get employment ● enable you to obtain new employment, or ● to open up a new income-earning activity (whether in business or in your current employment) The decision in FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 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. 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. The types of expenses related to self-education which are considered to be allowable under section 8-1 of the ITAA 1997 include: ● course or tuition fees of attending an educational institution (including student union fees, but excluding Higher Education Loan Program (HELP) payments) ● the cost of text books ● airfares, accommodation and meal expenses incurred on a study tour. | Detailed Reasoning - Application to your circumstances: You stated that you commenced the certificate to undertake retraining and to allow you to gain qualifications in a different area to which you were previously employed. You state the course was for a period of 12 months but after completing X months training you were offered casual employment. You state that if you had not been studying you would not have gained the position. The expenses were incurred at a point to soon. The expenses were not incurred in gaining or producing assessable income from your employment as a xxxxxx. The expenses were incurred as a prerequisite to commencing a new income earning activity. Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.

Relevant facts: You are currently employed in a casual position as a cook and food safety supervisor. You commenced this position in xxxx after completing several modules of your certificate. | Your previous employment was as a xxxxxxx and as a result of a workplace injury you were placed on insurance payments for which payments have ceased. | In xxxx whilst you were still on these payments you commenced a course to qualify yourself as a cook and to enable you to secure new employment. | The course consisted of twelve months training. | You decided to commence the retraining and allow you to secure new employment. | You state that if you had not been studying you would not have gained the position of a cook with your current employer.