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Edited version of your written advice

Authorisation Number: 1051310698215

Date of advice: 23 November 2017

Ruling

Subject: Deductibility of self education expenses

Question

Are you entitled to a deduction for self-education expenses related to a Certificate in Commercial Cookery?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2017

The scheme commenced on

1 July 2016

Relevant facts

You are currently employed in a casual position as a cook and food safety supervisor. You commenced this position in xxxx after completing several modules of your certificate.

Your previous employment was as a xxxxxxx and as a result of a workplace injury you were placed on insurance payments for which payments have ceased.

In xxxx whilst you were still on these payments you commenced a course to qualify yourself as a cook and to enable you to secure new employment.

The course consisted of twelve months training.

You decided to commence the retraining and allow you to secure new employment.

You state that if you had not been studying you would not have gained the position of a cook with your current employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Work-related 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 Income tax: deductibility of self-education expenses. In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of 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 (FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn’s Case); 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 (FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 (Hatchett’s Case).

Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses.

However, paragraph 15 of TR 98/9 explains self-education expenses will not be deductible if the study is intended to:

The decision in FC of T v. Maddalena 71 ATC 4161; 2 ATR 541 supports the Commissioner's view that no deduction is allowable if the study is designed to enable a taxpayer to open up a new income earning activity, whether in business or in the taxpayer's current employment. This would include studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged.

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 types of expenses related to self-education which are considered to be allowable under section 8-1 of the ITAA 1997 include:

Application to your circumstances

You stated that you commenced the certificate to undertake retraining and to allow you to gain qualifications in a different area to which you were previously employed. You state the course was for a period of 12 months but after completing X months training you were offered casual employment.

You state that if you had not been studying you would not have gained the position.

The expenses were incurred at a point to soon. The expenses were not incurred in gaining or producing assessable income from your employment as a xxxxxx. The expenses were incurred as a prerequisite to commencing a new income earning activity.

Consequently you are not entitled to a deduction for the expenses under section 8-1 of the ITAA 1997.

ATO view documents

Taxation Ruling TR 98/9

Other references (non ATO view, such as court cases)

FC of T v. Maddalena 71 ATC 4161; 2 ATR 541

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