Edited version of private advice

Authorisation Number: 1051793084506

Date of advice: 24 February 2021

Ruling

Subject: Self-education expenses

Question

Can you claim all of your self-education expenses incurred in pursuing a particular qualification?

Answer

No.

Question

Can you claim part of your self-education expenses incurred in pursuing a particular qualification?

Answer

Yes.

Question

Can you claim the deductible self-education expenses even if you had fees paid for using FEE-HELP?

Answer

Yes.

This ruling applies for the following period(s)

Year ending 30 June 2021

The scheme commences on

1 July 2020

Relevant facts and circumstances

You graduated with a legal degree.

You are employed, full-time, by a Government Department.

You have described your role as a "non-legal role".

Your intention for attaining the qualification is to be allowed to practice as a legal practitioner.

Your job does not require you to be a legal practitioner.

Your role requires you to assist with research and the drafting of legal and contractual documents.

Your role carries with it a significant component of assisting with contract administration, drafting and interpretation.

The course offers units related to contract law.

The course is offered by an Educational Institution.

You are being assisted by FEE-HELP in paying for your course fees.

Your employer is not reimbursing you for any of your costs.

Your employer has granted you some days of study leave, flexible work arrangements and time-in-lieu where necessary to satisfy your study commitments.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 82A

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 subsection 26-20(1)

Reasons for decision

Summary

You cannot claim all of your self-education expenses as the attainment of the qualification is incurred at a point too soon. You are entitled to a partial deduction on the basis that there is a direct connection between some of the individual units within the prescribed course of study and the role you are currently employed in.

Detailed reasoning

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 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. Self-education expenses are deductible where:

-   the taxpayer's income-earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge, or

-   the study of the subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayers' income from their current income-earning activities in the future.

No deduction is allowable for self-education expenses if the study is:

-   to enable the 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).

Several court cases have established general guidelines in determining the deductibility of self-education claims. FCT v. Maddalena (1971) 2 ATR 541; (1971) 45 ALJR 426; 71 ATC 4161, supports our view that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or to obtain new employment or open up a new income earning activity. Such expenses would come at a point too soon to be properly regarded as incurred in gaining assessable income.

Paragraph 57 of TR 98/9 is an example of Shannon, who is undertaking a 4-year university degree in mining engineering and takes a job as a casual employee with a mining company during the end of year holiday period. It is the company's policy to take only students who are pursuing relevant studies. Shannon is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon.

Paragraph 59 of TR 98/9 relates the example of Joseph, currently employed as a clerk in a public service department. He would like to transfer to a position in another section of the department and undertakes a course of study designed to equip him with the skills needed in that position. The study is unrelated to the skills required in his current position and is not likely to lead to an increase in income. As the study is designed to enable Joseph to enter a new income-earning activity, no deduction is allowable.

Paragraph 62 of TR 98/9 describes the example of Desiree, a general medical practitioner in partnership with two other general practitioners in a large regional town. She undertakes further study in dermatology in order to set herself up independently as a specialist dermatologist. The expenses related to the study are not allowable as the study is designed to open up a new income-earning activity as a specialist.

Application to your circumstances

To obtain the qualification you are required to successfully complete various topics/units, most of which are topics that do not involve the application and administration of contract law. You are studying for this qualification with the sole intention of being able to practice as a legal practitioner. Because your job requires you to frequently assist commercial managers in the administration and drafting of contracts, there is no connection between the work you do and the expenses you incur in the study for your Graduate Diploma in Legal Practice. This means that all your self-education expenses are not deductible under section 8-1 of the ITAA 1997.

While you are studying the course, you will be studying some topics/units that do have a high component of contract law to be studied and learned.

Your job requires you to frequently assist commercial managers in the administration and drafting of contracts, and because of this, there is a connection between the expenditure of the named topics/units to your position within the Government Department. This means that the expenses you incur which relate directly to the specific topics/units are allowable.

You will be able to claim the deduction of the financial year in which the expense was incurred.

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