Private ruling: Self-education expenses
Date of advice: 13 December 2016
Published: May 2017
Ruling period: Year ended 30 June 201X | Year ending 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Are you entitled to a deduction for your self-education expenses relating to your of your Diploma of specialised beauty services? | A1: Yes

Relevant facts and circumstances: You are self-employed and have run a beauty services business since 201X. Your business offers services for special occasions in addition to actor and actress services that include preparation for photo shoots and cosplay You have provided services in the past for clients for the purposes of preparation for pre-production events. You have previously completed a Certificate II in relevant beauty services (Certificate II). You are currently completing a Diploma of specialised beauty services (Diploma) which is an extension of the Certificate II. The Diploma course runs over a calendar year in 201X. The cost of the Diploma course is $1X,000. For the year ended 30 June 201X you paid $XX,XXX in course fees. You will pay the balance of the course fees during the year ending 30 June 201X. The Diploma builds upon the skills learnt in the Certificate II that you use in your business. The Diploma will enable you to obtain contracts that are restricted to those who have completed a Diploma of specialised beauty services as some jobs require beauty services that can only be legally provided by individuals who have completed this course or similar due to the use of chemicals. Completion of the Diploma will likely lead to an increase in your income and you will be able to command a higher premium for the existing services offered by your business.

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

Reasons for decision: Summary: Your self-education expenses relating to your Diploma of specialised beauty services have the necessary and relevant connection with the earning of your assessable income, and are deductible under section 8-1 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: 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. Additionally a deduction is allowable for self-education expenses if the subject of self-education leads to, or is likely to lead to, an increase in the taxpayer's income from current income-earning activities. In your case you have been working as a self-employed beauty artist for a number of years. You have a Certificate II in relevant beauty services and you are currently studying a Diploma of specialised beauty services, which is an extension of the Certificate II you have undertaken. You are able to use the knowledge gained in the Diploma in your day to day work activities as they teach more advanced beauty application techniques and therefore will maintain and improve skills necessary to your work. The Diploma also enables you to increase your income from your business activities as you will be able to charge a higher rate on your existing services. It is accepted that the Diploma of specialised beauty services will maintain or enhance the skills that you require to perform your duties as a beauty artist, as well as allowing you to increase your income from your current income-earning activities. Therefore, the self-education expenses relating to the Diploma have the necessary and relevant connection with the earning of your assessable income, and are deductible under section 8-1 of the ITAA 1997. If self-education expenses are allowable under section 8-1 but also fall within the definition of 'expenses of self-education' in section 82A of the Income Tax Assessment Act 1936 (ITAA 1936), the section operates to limit the amount of expenses otherwise allowable under section 8-1 of the ITAA 1997. Where section 82A of the ITAA 1936 applies, the total allowable deduction under section 8-1 of the ITAA 1997 cannot be greater than the amount by which the net amount of expenses of self-education exceeds $250. In other words, only the excess of the self-education expenses over $250 may be considered for deduction under section 8-1 of the ITAA 1997. In performing this calculation, it is not necessary that the expenses of self-education be deductible (provided they are 'necessarily incurred' in connection with a prescribed course of education). Expenses that are deductible under provisions other than section 8-1 are also taken into account in the section 82A calculation. However, having established the maximum amount (i.e., the net amount of self-education expenses over $250), any expenses that meet the requirements of section 8-1 of the ITAA 1997 may be claimed in full up to the maximum amount. The tuition fees are expenses of self-education as defined in section 82A of the ITAA 1936 and will therefore be reduced by $250 in each of the tax years they are claimed.