Private ruling: self education
Published: January 2012
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011
Date scheme commenced: 1 July 2008

Ruling: Q1: Are you entitled to a deduction for expenses incurred for the courses and membership? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Detailed Reasoning - Self education expenses: 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 or are necessarily incurred in carrying on a business for the purpose of 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. The deductibility of self education expenses fall for consideration under section 8-1 of the ITAA 1997. A number of significant court decisions have determined that, for an expense to satisfy the tests outlined in section 8-1 of the ITAA 1997: · it must have the essential character of an outgoing incurred in gaining assessable income or, in other words of an income-producing expense ( Lunney v FC of T (1958) 100 CLR 478); · there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income ( Ronpibon Tin NL v FC of T (1949) 78 CLR 47) · it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income ( Charles Moore & Co (WA) Pty Ltd v FC of T (1956) 95 CLR 344; FC of T v Hatchett 71 ATC 4184 ( Hatchett's case ). 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. However, TR 98/9 states that no deduction is allowable for self education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income earning activity. Paragraph 42 or TR 98/9 states: If a course of study is too general in terms of the taxpayer's current income earning activities, the necessary connection between the self education expense and the income earning activity does not exist. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances. TR 98/9 states that a personal development course that places particular emphasis on professional skills needed in the employment environment, and where trained instructors supervise a structured program, is accepted as being a course of education provided by a place of education. 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. It is necessary to determine whether there is a sufficient nexus between the expenditure and the taxpayer's income-earning activities. In Case U101 87 ATC 616 ( Case U101 ) and Naglost v. FC of T (2001) 2002 ATC 2008; (2001) 49 ATR 1028 ( Naglost ), 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 aim of the course was to assist those who felt in need of motivation and purpose in life and to improve self esteem. 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. It could not be said that the studies were part and parcel of the employment, or that they were incurred in the process of carrying out duties as an employee. Nor could it be seen that they would have a direct effect on the taxpayer's income. Conversely, in Naglost 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. Testimony from the taxpayer's superior officer stated that the course would enhance the taxpayer's ability to perform at a high level. The AAT held that the majority of the courses were relevant to the taxpayer's occupation, but that the course 'Wealth Mastery' was of a purely personal nature and thus not deductible. The AAT held that the majority of the expenditure was allowable as it was considered to be directly relevant to the applicant's role as a manager. The applicant had direct management responsibility for a group of 20 to 25 people and was responsible for the unit's physical training, plus occupational health and safety. Therefore, expenditure on the course was considered to be sufficiently relevant to the taxpayer's income producing activities. Naglost 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. In Hatchett's case , a primary school teacher was not allowed deductions for university fees incurred on an Arts degree course. The university fees had no connection with the activities by which Mr Hatchett gained his income as a primary school teacher. It was not enough that Mr Hatchett's employer encouraged the taxpayer to undertake the course, nor that the course was likely to make Mr Hatchett a better teacher in a general sense. Cases such as Case M10 (1961) TBRD 69 ( Case M10 ) and Case V13 88 ATC 163 ( Case V13 ) support the view that personal development courses are not considered to be incurred in earning the income from a taxpayer's occupation. These expenses are considered to be incurred in developing the taxpayer's personal capacity and experience, thus are considered to be private in nature. The expenses are more correctly characterised as those which are necessary to put the taxpayer in a position to carry out the income earning activities. In Case M10 , the taxpayer was an agent for a life assurance society. He was denied a deduction for the cost of a Dale Carnegie Course in which he received instruction and training on Effective Speaking, Leadership Training and Human Relations. The prospectus of the course states that the course consists of a combination of public speaking, salesmanship, human relations, personal development and applied psychology. In disallowing the deduction claimed, the member of the Tribunal commented that expenditure by a taxpayer upon development of his personality, self-confidence and self-expression can only be expenditure of a private nature whatever the ulterior purposes may otherwise be served. The course was in the nature of an advanced educational training for people in all walks of life and was private in nature and not allowable as a deduction under section 8-1 of the ITAA 1997. It was held that there was insufficient connection with his occupation. In Case V13 , the taxpayer was a life assurance sales woman. In an attempt to improve her selling skills the taxpayer undertook, at considerable expense, a series of courses in communication, personal development and business skills offered by the Church of Scientology. She claimed that the purpose of her study was to improve her selling skills. The taxpayer's claims for the cost of the course and for depreciation of books were disallowed by the Commissioner and her appeal to the objection was further disallowed by the AAT. In disallowing the claim P M Roach (Senior Member) indicated that he accepted that her studies contributed to her personal development in ways that gave her a greater self-confidence and a greater art of communication and there-by gave her a greater capacity to persuade others to follow courses proposed by her. He stated that despite these contentions, the courses undertaken were principally directed to the personal development of the individual and of her capacities. The courses under consideration were conducted at that level and were so closely and deeply involved with the individual person that they must be characterised as private. In Case H40 76 ATC 337, the taxpayer was employed by the Australian Government. He incurred fees for a Dale Carnegie course in Effective Speaking and Human Relations. The subjects covered fell into three broad groups, namely, instruction in speaking, instruction in methods of developing self-confidence and memory training. It was held that the qualifications offered by the course in effective speaking and human relations were too general. The instructions given in public speaking, in methods of developing self-confidence and in memory training were directed towards the enrichment of the taxpayer as a person rather than in enhancing his qualities as an employee. Taxation Ruling IT 2198 deals with allowable deductions for voluntary expenditure incurred by employee taxpayers. Paragraph 13 states that the Taxation Boards of Review have seen a number of teachers seeking income tax deductions for overseas travelling expenses. Most of the claims were rejected because the teachers were not able to establish a positive connection between the overseas travel and the performance of their duties of employment as teachers. In the ultimate the claims have been based on a general proposition that the overseas travel has made the taxpayers better able to carry out their duties which, of itself, is not sufficient to enable the expenditure to be allowed as a deduction. In Case R94 84 ATC 628 a college librarian was disallowed overseas travel expenses in making a study tour of China organised by the Library Association. The benefits derived by the taxpayer might have made her a better librarian, but the nexus between the outgoings and deriving assessable income was too remote. The taxpayer voluntarily made the trip and the expenditure was essentially of a private nature. In the Board of Review Case R47 84 ATC 380; (1984) 15 ATR 824, the taxpayer, a French language teacher, claimed a deduction for part of the expenses in travelling to France. The trip was not undertaken at the request of the taxpayer's employer. She asserted that the trip increased her teaching skills. The Board of Review stated that the fact that the taxpayer became a better teacher because of the trip did not mean that expenses were incurred in the course of gaining her assessable income as a teacher. The expenses were essentially recreational and private in nature. There are many experiences which may help a teacher however this does not automatically mean that the associated expenses are deductible. In Case U109 87 ATC 657, the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The AAT examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that the trip was essentially recreational in character and not deductible. The AAT also stated that some taxpayers are fortunate in finding personal and recreational satisfaction in their field of endeavour and that in this case the trip was recreational in character and not deductible. Although these cases deal with travel expenses, the principles have relevance to your situation. The courses cover areas of communication, empowerment and strategic vision to help participants improve their lifestyle and wealth. The content of the courses focus on maximising your potential, to master language and create wealth in all aspects of your life. The courses are open to people from any field. Although the courses may expand your personal and professional influence, the courses are considered to be for self improvement and personal development. By applying the principles as established in the above cases to your case, it is considered that the expenses of the program are not themselves directly attributable to the derivation of your assessable income. You have been a teacher for more than 30 years. The Trainer Training courses teach you how to be a trainer or presenter in any field. The completion of the Trainer Training Level 2 course allows you to be considered for an official trainer role. Although you may acquire some new skills and knowledge, it is not considered that the courses are directly related to your current income earning activities as in Naglost. The courses help change personal values, attitudes and thoughts and transform your personality. It is acknowledged that the courses will impact all aspects of your life including your professional life, however, the focus is on rapid human change that eliminates thoughts and patterns that have prevented you from reaching your full potential. The outcomes are aimed at improving every aspect of your life instantly and permanently. The courses are too general in terms of your income earning activities and the associated costs do not have a sufficient nexus to the derivation of your assessable income. While the courses are included in your professional development plan and may be of assistance to you as a facilitator for Tapping Teaching Talents, the expenses incurred in acquiring this knowledge and experience are not expenses incurred in gaining your assessable income. Furthermore, the benefits are largely personal and private in nature. Although improving your personal and communication skills may impact on your working life, it is not a cost that is sufficiently connected to your assessable income. Case V13 provides strong support for this view. Accordingly, the expenses for the courses are considered to be more related to your personal development which is considered to be private in nature. The courses do not have a sufficient nexus to your income earning activities and are too general in terms of your current income earning activities. Therefore the expenses are not deductible under subsection 8-1 of the ITAA 1997. | Detailed Reasoning - Membership: Taxation Determination TD 1999/45 discusses whether the cost of life membership paid to a work related or business association is an allowable deduction and, if it is, whether it is allowable in full in the year it is paid. It states that a deduction is allowable if the essential character of the expense relates to the earning of assessable income and it is neither a capital expense nor a non-deductible expense. The membership provides you with future opportunities to be coached, mentored, participate in transformational conversations and presentations, and to meet and network with other successful international individuals from various areas including business, health, life skills, training, coaching and speaking. You paid for your membership in the 2010-11 income year. This membership will provide various opportunities in the future. The program is not regarded as a work related or business association. There is no evidence to show that the membership has the necessary connection with your current or future income earning activities. Although networking and coaching may assist you in your employment duties, this is not sufficient to make your membership deductible.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The arrangement that is the subject of the ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: | · the application for private ruling, and | · additional information. | You are employed as a professional and have been in this position for a few years. | One of your duties is to teach. You also undertake research. | One of the key accountabilities of your position is to have effective communication and constructive interaction with others. | You have undertaken the following courses: | · Wealth Acceleration Certification Level 1, 2 and 3, | · Trainer Training Level 1 and 2, | · Billionaire Bootcamp, and | · Rich Heart Wealthy Mind | Your employer approved you attending the courses. You attended the courses in work time. | The Wealth Acceleration Certification Level 1 course helps participants to harness the power of their unconscious mind and develop communication skills to give the ability to maximise their potential and multiply effectiveness. Participants will have the potential to empower clients, colleagues and self to break through the behavioural patterns. | Wealth Acceleration Certification Level 2 works with changing personal values, attitudes and other deep subconscious re-programming and thought viruses that determine the level of results you achieve. It's about transforming the very basis of personality to make powerful, positive and permanent changes. | Wealth Acceleration Certification Level 3 provides you with communication skills to inspire, influence and motivate other people. The course will help you become a truly charismatic and compelling communicator. | Trainer Training Level 1 is an advanced presenter immersion course. | Trainer Training Level 2 provides instruction in areas such as rapid human change, communication, persuasion and accelerated learning. You will learn how to be a trainer or presenter in any field. | The Warrior Spirit teaches you to become a charismatic, magnetic and influential leader and how to identify limiting patterns of behaviour in yourself and others and to replace them with new behaviours that drive you forward. It also teaches you how to create or enhance the effectiveness, morale and loyalty of any team and have them all achieving any goal or dream. | Billionaire Bootcamp uses technologies of subconscious re-programming and cognitive re-imprinting to eliminate thoughts and patterns that have prevented you from fulfilling your dreams. It gives you processes that will allow you to embody the chosen beliefs, values, habits and attitudes of great world leaders and enriches your interpersonal relationships. | Rich Heart Wealthy Mind helps you to create the life of your dreams and to master your mind and behaviours and eliminate fear and doubt. | You have also become a paid up member of the personalised, advanced leadership coaching program.