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

Ruling: Q1: Are you entitled to a deduction for your self-education expenses? | A1: Yes. | Q2: Does section 82A of the Income Tax Assessment Act 1936 apply to your self-education expenses? | A2: Yes.

Relevant facts and circumstances: You are employed in a project planning role. You are undertaking a post graduate project management course at a university. Your employer has stated that the course is related to the duties of your employment and is likely to improve your opportunities for promotion. You have paid for your course fees paid using FEE-HELP loan funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1936 section 82A

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. 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; (1961) 8 AITR 406). 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, no deduction is allowable for self-education expenses 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. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income ( FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). In your case, it is accepted that the course you are undertaking will enhance the skills and knowledge that are required in the performance of your current employment duties. Consequently, the self-education expenses incurred in undertaking this course have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997. Your deductible self-education expenses include course fees paid using FEE-HELP loan funds (ATO Interpretative Decision ATO ID 2005/26). However, payments made to reduce your FEE-HELP debt are not deductible (ATO ID 2005/27). Additionally, in certain circumstances, allowable self-education expenses incurred in connection with a "prescribed course of education" may be reduced by up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 82A(2) of the ITAA 1936 defines "prescribed course of education" as: a course of education provided by a school, college, university or other place of education, and undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade or in the course of employment. We consider that your course qualifies as a 'prescribed course of education' and therefore your expenses are subject to section 82A of the ITAA 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on the ATO website at www.ato.gov.au .