Private ruling: Self education expenses
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for your course fees? | A1: No. | Q2: Are you entitled to a deduction for the associated travel, accommodation and other expenses in attending the course? | A2: No.


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. Self education expenses such as course fees are generally deductible under section 8-1 of the ITAA 1997 where they have the necessary connection to your current income earning activities. Taxation Ruling TR 98/9 discusses the circumstances under which self education expenses are allowable as a deduction. 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). 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. No deduction is allowable for self education expenses if the study is designed to enable the taxpayer to get employment, to obtain new employment or to open up a new income earning activity, whether in business or in the taxpayer's current employment. If the studies relate to a particular profession, occupation or field of employment in which you are not yet engaged, the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541) ( Maddalena's case ). To determine whether circumstances exist which would support your deduction for the course fees, the essential character of the expenditure must be considered. It is necessary to determine whether there is a sufficient nexus between the expenditure and your current income-earning activities. Case U186 , 87 ATC 1066 involved a solicitor who resigned from full-time employment with a firm of solicitors and went overseas to study for a master's degree. His employer gave him assurance that he would be welcome to renew his employment with them on his return. On his return to Australia, he resumed employment with the same firm. The Tribunal refused deductions for travel, study and living expenses associated with the overseas study. The expenses were incurred with a view to the future generation of income to arise from future income-earning activities; they were not incurred in the course of deriving any income during the period the expenses were incurred. The existence of a connection between an outgoing and future source of assessable income is not sufficient to satisfy the requirements of section 8-1 of the ITAA 1997. In your case, as no income was being derived while undertaking the course, it is considered that the course is directed at your future income. The increased knowledge may help you obtain more positions on your return to Australia. It is considered that the decision in Maddalena's case applies to your situation. Your studies will assist you to get future positions and have been incurred at a point too soon. Although you have extensive employment experience in the relevant field, at the time of your studies, you were not earning assessable income. The necessary connection between the course expenses and your income earning activities does not exist. Therefore no deduction for the course fees or associated travel, accommodation and other expenses are allowable under section 8-1 of the ITAA 1997.

Relevant facts: You have been part of an industry for several years. | You previously worked in the industry with two different employers. | Your employment position at entity A included having an in depth knowledge. | As there is a lack of in depth education in your field in Australia, you went overseas for an intensive course. | The course provided basic to in depth knowledge on all aspects of your field. | Your former boss as well as colleagues recommended the course. | As entity A is a smaller sized company, they did not have the ability to keep your employment and leave the job unmanned for the period while you attended the course. | You incurred expenses for air fares, travel insurance, train, telephone, school fees, accommodation, books and living expenses. | The course will open up more doors for you in the industry. The competition and lack of education in the industry means roles are harder to get. | You now have more knowledge and practical experience and the ability to work better with relevant entities. | You are currently continuing with your own projects whilst looking for a suitable role in the relevant industry.