Private ruling: Self-education expenses
Date of advice: 25 October 2017
Published: March 2018
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim a deduction for the expenses incurred from July XXXX to December XXXX in relation to self-education expenses? | A1: Yes. | Q2: Are you entitled to claim a deduction for expenses incurred in relation to self-education expenses from January XXXX to November XXXX? | A2: No. | Q3: Are you entitled to claim a deduction for expenses incurred in relation to self-education expenses from July XXXX to June XXXX? | A3: No.

Relevant facts and circumstances: You were employed by XXXX in XX XXXX as a manager. Your duties included managing a team, managing the sales opportunities and overseeing the commercial proposals for customers to maximise revenue for your employer. You undertook to take studies in a Master in Business Administration in XX XXXX. Undertaking this course would enable you to improve your skills in your current role by building up your management skills, finance skills and assisting you with marketing and strategy aspects. You undertook this course so it would enable you to secure roles in your current employment which required these skills. Your employer assisted by funding the course however you were required to pay back the funds when you resigned as you had not undertaken the study for more than 12 months before resigning. You decided to resign from XXXX in XX XXXX and took up new employment immediately after resigning. You commenced employment with XXXX in XX XXXX and you were employed as a general manager. Within a year you were promoted to a different role. You then decided to resign from XXXX in XX XXXX and return to XXXX. You recommenced employment with XXXX in XX XXXX and were employed in a different role than originally when you were employed with them. You have just recently received a promotion with XXXX in XXXX. The two employers are not related employment entities and are not considered the same employers in any way. You did not work for the same employer for the entirety of your course. You gained new employment when you resigned and were employed by XXXX. You also had opportunities which arose that provided promotions to new income earning activities. You were not employed for the period of XX XXXX – XX XXXX.

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

Reasons for decision: Summary: Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature. The Commissioner’s view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9. In accordance with paragraphs 13 and 14 of TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 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; 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 activity in the future. Therefore, provided 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, as stated in paragraph 15 of TR 98/9, self-education expenses will not be deductible if the study is intended to: ● enable you to get employment, ● enable you to obtain new employment, or ● to open up a new income-earning activity (whether in business or in your current employment). This view is supported by the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 , which establishes the principle that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or obtain new employment. Such 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: We accept that the course you are undertaking related directly to your initial employment as it satisfied the requirements of being entitled to self-education expenses. However we do not consider that any expenses you incurred from the point in time when you decided to resign and obtain new employment are deductible under section 8-1 of the ITAA 1997. We consider from that point on, when viewed objectively, the course you are undertaking will assist you to obtain new skills and specialised knowledge, and will provide you with qualifications that will enable you to obtain new employment or to open up a new income-earning activity, therefore you are not entitled to a deduction for self-education expenses from XXXX to present.

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