Private ruling: Self-education expenses
Date of advice: 18 April 2018
Published: July 2018
Ruling period: Financial year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Is the training you paid for to be qualified in a new occupation deductible pursuant to section 8-1 of the Income Tax assessment Act 1997 (ITAA 1997)? | A1: No | Q2: Will the expenses you pay in connection with studies that increase your knowledge in your current employment be deductible pursuant to section 8-1 of the ITAA 1997? | A2: Yes

Relevant facts and circumstances: During the course of your employment you were required to undertake training to change to a new position in the same field. You paid the full cost of this course. Once you finished your training you applied for a new position in a different company. Your new employer requested that you undertake studies to increase your knowledge on a specific subject related to your occupation. Your employer paid for the course but not for the related expenses.

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 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. Paragraphs 13 and 14 of TR 98/9 provide that self-education expenses will satisfy the requirements of section 8-1 of the ITAA 1997 if: ● a taxpayers income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge; or ● 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 their current income-earning activities in the future. Therefore, where there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for your self-education expenses. 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 taxpayers 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). TR 98/9 provides the following example: Desiree is a general medical practitioner in partnership with two other general practitioners in a large regional town. She undertakes further study in dermatology in order to set herself up independently as a specialist dermatologist. The expenses related to the study are not allowable as the study is designed to open up a new income-earning activity as a specialist. In your circumstances whilst the knowledge gained from the training may be of assistance as a X, this is subsidiary to the main reason for undertaking the course, which is, becoming a Y. Whilst there is some relation to your employment and your course of study, the main reason for completing this course is to open up a new income earning activity, that is, you wanted to obtain the position of Y. Therefore, the expense of those studies is incurred at a point too soon to be regarded as having been incurred in gaining your assessable income and you are not entitled to a deduction for this expense under section 8-1 of the ITAA 1997. As stated above, where there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for your self-education expenses. In your situation, the course will improve your knowledge of Y which is part of your current income-earning activities and is therefore the expenses are deductible.