Private ruling: Work related expense - self education
Date of advice: 1 December 2015
Published: February 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 01 July 2014

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

Relevant facts and circumstances: You arrived in Australia and you are currently working on a temporary visa. You are completing a Masters part-time. Once the Masters is completed, this will give you access to promotional opportunities within your career enabling you to move into higher level management and administration positions. You believe your studies are directly related to your career and your employment opportunities within Australia. You are studying externally through a foreign educational institution. Tertiary and course fees have been incurred for the studies and you elected not to pay these fees when they fell due. Instead you have deferred payment to a foreign student loan scheme similar to HECS. This loan is not repayable until your income reaches the minimum repayment thresholds. During this financial year, your income will reach the minimum repayment threshold and you will be required to make repayments to your student loan.

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. 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 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, 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. They are incurred in getting, not in doing, the work which produces the income (High Court decision in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). 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. | Detailed Reasoning - Application of your circumstances: In your case, you incurred expenses while studying a Masters which allows you to open up new employment and promotional opportunities. However, at the time you incurred these expenses, your studies were not undertaken to maintain or improve an existing skill or knowledge used in your 'current' income earning activities. Nor can it be said that the subject of your studies 'objectively led to, or was likely to lead to', a future increase in your income from your 'current' income-earning activities. These expenses are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. Accordingly, you are not entitled to a deduction for your self-education expenses under section 8-1 of the ITAA 1997.