Private ruling: Self-education expenses
Date of advice: 7 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for self-education expenses for completing course? | A1: No


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 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. Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities. Taxation Ruling TR 98/9 considers the deductibility of self-education expenses and states that if a taxpayer's 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, 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, 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 (whether in business or in 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. 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 designed to enable a taxpayer to get employment or to obtain new employment. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Case J30 77 ATC 282; 21 CTBR (NS) Case 52 and Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549, deal with claims made by law clerks for admission fees to practise. The claims were disallowed as it was found that the expenses secured the applicants a 'lasting advantage' and as such, were capital in nature. Although you may gain knowledge and skills from the program that could be of some assistance in your work, the predominant focus of the course is designed to open up a new income earning activity, that of a professional. It is considered that there is an insufficient connection between the skills and knowledge required in your duties and the program. The program enables you to develop competency in the practice areas and professional skills required professional. Similar to the cases relating to admission fees, the program you undertook will secure you a lasting advantage, that of becoming a professional. Consequently, the self-education expenses you incur do not have the necessary and relevant connection with the earning of your assessable income. You are therefore, not entitled to a deduction for self-education expenses.

You remained employed while you undertook this course. | You received a qualification. | You incurred fees of $XXX for this course. | You did not receive reimbursement from your employer. | You have not sought new employment and you do not practice in the area the course related to.