Private ruling: Deduction for self education expenses
Published: June 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

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

Relevant facts and circumstances: You are licensed to carry out specific duties in your work environment. You intend to undertake accreditation to carry out the same duties outside your work environment. The accreditation body does not recognise your work based licence and requires that you pass their accreditation process. This will involve training to use equipment that you are unfamiliar with. This equipment is not used by your employer. You also state that in addition the new licence will enable you to use your current skills and qualifications to gain alternative employment at some time in the future.

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 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 your case, in your present employment you have the required skills and accreditation to carry out your role and you are to undertake accreditation to obtain a licence do the same type of work away from your present employer. You will learn to use equipment that is not used by your employer. While we acknowledge that the knowledge and skills gained from undertaking the process of obtaining the new accreditation could be of some assistance in your current position, it is considered that the focus of obtaining the new accreditation is to give you the ability to obtain alternative work in your field in the future. As there is an insufficient nexus between the courses of self education and your current income earning activities, the self education expenses associated with the courses 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.