Private ruling: Self-education expenses
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

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

Relevant facts and circumstances: You are an employee. You are undertaking a course of study. Your employment and your study are in different fields. Your employer provides some support for your study and you have gained some short term employment since you began studying.

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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business 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. In addition, 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, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating 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. 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 expenses and the income-earning activity does not exist. In your case, you have undertaken a course and it is considered that there is an insufficient connection between the skills and knowledge required in your current duties and the course that you have undertaken. Although you may gain some knowledge and skills from the subjects studied that could be of some assistance in your work, it is considered that the study is designed to enable you to open up a new income earning activity. While we acknowledge that your employer has supported your study through a program however the program criteria focuses mainly on the needs of the employer and on future jobs you may acquire, and not whether it is beneficial to your current role. Therefore, the fact that you received program assistance does not establish that the study has the sufficient nexus to your current income-earning activities. Additionally, whilst the study may make you more competitive in a selection process and you may receive increased income from a promotion or higher duties, for the self-education expenses to be deductible, the increase in income has to be for your current income-earning activities and not from a new higher-paying job. As the study is designed to enable you to open up a new income earning activity and there is insufficient nexus between the course of self-education and your current 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.