Private ruling: Self education expenses
Date of advice: 1 November 2016
Published: February 2017
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for all the self-education expenses incurred in relation to the course? | A1: No. | Q2: Are you entitled to a deduction for a portion of the self-education expenses incurred in relation to the course? | A2: Yes.

Relevant facts and circumstances: You are currently receiving compensation payments, following an accident at work. You applied to do a course before you were employed. You were required to pay some course fees in advance. The units of competence listed on the course are compatible with your duties. The course of study is not required by your employer and it was your choice to improve your skills and obtain a qualification. Since the accident you have not been working, and you have been receiving compensation payments, initially from your employer, and then from your insurer.

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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business 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. In addition, 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, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. | Detailed Reasoning - Application to your circumstances: In your case you applied for a course before you were employed. The course fees paid prior to your employment did not relate to any income earning activities. Therefore you are not entitled to a deduction for these expenses. However, the course fees that you paid while employed will be deductible as we accept that they related to your income earning activities.