Private ruling: Self-education expenses
Date of advice: 31 August 2015
Published: August 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

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

Relevant facts and circumstances: You are an employee. You undertook a few different roles with your employer during the financial year. You are undertaking a course of study which you believe was related to two of your roles. The course was written into your performance agreements, including for the role which you do not believe your studies were relevant to. Your employer provides some support for your study.

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. 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 FC of T v. Hatchett 71 ATC 4184, a primary school teacher was not allowed deductions for university fees incurred on an Arts degree course. The university fees had no connection with the activities by which Mr Hatchett gained his income as a primary school teacher. It was not enough that Mr Hatchett's employer encouraged the taxpayer to undertake the course, nor that the course was likely to make Mr Hatchett a better teacher in a general sense. In your case, you are undertaking a course of education 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 the study assistance program, the study assistance criteria focuses mainly on the needs of your employer, and on future job positions you may acquire with your employer, and not whether it is beneficial to your current role. Therefore, the fact that you received study assistance does not establish that the study has the sufficient nexus to your current income-earning activities. 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.