Private ruling: Self education expenses
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010 | Year ending 30 June 2011
Date scheme commenced: 1 July 2008

Ruling: Q1: Are you entitled to a deduction for self education expenses in relation to your course? | A1: No

Relevant facts and circumstances: You are a part-time employee. Prior to 20XX you were employed as an HR Officer. At the beginning of 20XX you were promoted to HR Manager. Your position description states that you are responsible for the development, implementation and administration of strategic human resource management initiatives. From early 20XX to mid 20XX you attended a course that covered various topics such as self awareness, leadership, success in life and profession, improving personal and professional relationships, managing conflict, overcoming fear and phobia etc. You have stated that you undertook the course to maintain and improve the specific knowledge required for your current work activities. You have attached a document to your application where you have linked each of the seminar outcomes to some of your duties as HR Manager. For example the seminar on "how to negotiate and get desired outcome" helped you to better perform your duty "use superior interpersonal skills to deal with conflict situations in the workplace". You have provided a letter from your employer where they have expressed their support towards your course. Your employer provided you paid leave to attend some parts of the course. You also invested your personal time towards the course. Your employer did not provide any financial assistance for the course.


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. Expenses associated with updating knowledge that is used in the course of earning your assessable income are self education expenses. Taxation Ruling TR 98/9 discusses self education expenses. Generally, a deduction is allowable for self education expenses under section 8-1 of the ITAA 1997 if your income-earning activities are based on the exercise of a skill or specific knowledge, and the self education enables you to maintain or improve that skill or knowledge. No deduction will be allowable if the course of study is too general in terms of the taxpayer's current income earning activities and there is not a sufficient nexus between the course of self education and the income earning activity. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances. To determine whether circumstances exist which would support the deduction for a personal development course we must look to the 'essential character' of the expenditure and specific duties required by a taxpayer to undertake their income earning activities. In Case U101 87 ATC 616 ( Case U101) and Re Naglost and Commissioner of Taxation (Cth) (2001) 2002 ATC 2008; (2001) 49 ATR 1028 ( Naglost's Case ), the Administrative Appeals Tribunal (AAT) considered the deductibility of expenditure on personal development courses. Case U101 concerned a taxpayer who was employed as a Taxation Office inspector. He undertook a course on communication, clear self-expression and work organisation. The course was not formally recommended or encouraged by his employer but the taxpayer considered it would assist him to carry out his work more efficiently. The AAT denied the claim and held that there was not a sufficient nexus between the expenditure in pursuing the course and the taxpayer's employment. Conversely, in Naglost's Case the AAT allowed a partial deduction to a serving member of the Royal Australian Air Force (RAAF) who undertook a course of study at 'Mastery University'. The taxpayer's duties included management responsibilities and the course of study was designed to enhance leadership, management capabilities and decision-making processes. Further, the course was approved by the taxpayer's employer and some expenses were reimbursed by the RAAF. The AAT held that the expenditure was allowable as it was objectively considered the course would improve the taxpayer's proficiency in his employment, in particular in relation to his management responsibilities. Therefore, any expenditure on the course would be relevant and incidental to the taxpayer's income-producing activities. The Tribunal also found that whilst the fact the RAAF assisted the taxpayer to pay the course fees was not determinative of itself; it indicated that the RAAF regarded the course as relevant to the taxpayer's employment. Naglost's Case demonstrates that a personal development course will have the 'essential character' of an income-producing expense where a taxpayer can demonstrate a link, not only to skills and knowledge in general, but also to their current duties. Furthermore, where an employer subsidises a particular course of study, though not decisive in itself, this fact may lend weight to self education expenditure having a nexus with income earning activities. In your case, the knowledge that you gained from undertaking the course may result in an improvement in your self confidence, self awareness and your leadership skills and thereby allow you to develop as better HR manager. However, the main focus of the course is on personal development and improvement. The main component of the course does not deal directly with the technical and theoretical aspect of HR management. A typical HR management course would include topics such as: · Employee Relations · Recruitment and Selection · Benefits and Compensation · Performance and Reward · Training and Development · Business Statistics · Human Resources Management: Industry Specific · International Management · Introduction to Economics · Environmental Management · Decision Making · HRM Techniques · Principles of Managerial Accounting · Business Law · Legal Context of Employment Relations · Project Management · Strategic Human Resource Management · Human Resource Information Systems · Strategic Management Your course you attended is considered to be too general to have a specific connection with your employment as an HR manager. You paid all the costs of the course on your own. If your employer had provided any financial assistance with the course fee it would lend weight to self education expenditure having a nexus with income earning activities. We acknowledge that your employer did morally support you to undertake this training. They also provided you with paid leave to attend seminars. Although this may be a factor in determining that your course of self education is relevant to your income earning activities, the other factors surrounding your case suggest that your course is not directly related to your employment duties. It is considered that an insufficient nexus exists between your course and your current income earning activities. Accordingly, the cost of attending this program is not deductible under section 8-1 of the ITAA 1997.

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