Edited version of private advice

Authorisation Number: 1052338507212

Date of advice: 10 December 2024

Ruling

Subject: Deductions - self-education expenses

Question 1

Are your Bachelor of Nursing course fees an allowable deduction in accordance with section 8-1 of the ITAA 1997?

Answer 1

Yes.

Question 2

Will section 357-70 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) operate to have this private ruling prevail over the inconsistent ruling issued on DDMMYYYY?

Answer 2

Yes.

This ruling applies for the following period:

For the income year ended DDMMYYYY

The scheme commenced on:

DDMMYYYY

Relevant facts and circumstances

You enrolled in the Diploma in Nursing commenced the course on DD MM YYYY.

You completed the course in 20XX-XX income year.

You commenced a Bachelor of Nursing degree on DD MM YYYY.

You then started working as an Enrolled Nurse on DD MM YYYY.

While working as an Enrolled Nurse you incurred the expenses relating to the course.

You were given credit for X subjects of the degree that you studied as part of your Enrolled Nurse course.

You then commenced work as a Registered Nurse on DD MM YYYY.

You were given time off while working as an Enrolled Nurse to study and you also took annual leave.

Your employer did not contribute to the costs of the course fees.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Taxation Administration Act 1953 schedule 1 section 155-10

Taxation Administration Act 1953 schedule 1 section 357-70

Taxation Administration Act 1953 schedule 1 section 357-75

Reasons for decision

Section 8-1 of the ITAA 1997 provides:

You can deduct from your assessable income any loss or outgoing to the extent that:

(a)           it is incurred in gaining or producing your assessable income; or

(b)           it is necessarily incurred in carrying on a business for the purposes of gaining or producing your assessable income.

...

However, you cannot deduct a loss or outgoing under this section to the extent that:

(a)           it is a loss or outgoing of capital, or of a capital nature; or

(b)           it is a loss or outgoing of a private or domestic nature; or

(c)           it is incurred in relation to gaining or producing you *exempt income or your *non -assessable non-exempt income; or

(d)           a provision of this Act prevents you from deducting it.

The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual.

To be deductible under section 8-1 of the ITAA 1997, the expenditure must be able to be characterised as having been incurred in gaining or producing assessable income. This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce your assessable income.

In your case you incurred the Bachelor of Nursing course fees when you were working as an Enrolled Nurse during the 202X-XX income year. Your income-earning activities as an Enrolled Nurse are based on the exercise of a skill or some specific knowledge and the self-education enables you to maintain or improve that skill or knowledge (principle 1 in paragraph 22 of TR 2024/3). This is because of the additional education and practical components of the Bachelor of Nursing that will improve your ability to perform your duties.

It can also be said in your case that the self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future (principle 2 in paragraph 22 of TR 2024/3). This is because the education will enable you to become a registered nurse over an enrolled nurse.

Expenses incurred on improving skills and specific knowledge are not of a capital nature - they do not amount to the acquisition of something of an enduring nature (paragraph 29 of TR 2024/3). Therefore, in your case this does not preclude the deduction under section 8-1 of the ITAA 1997 and your course fees are not capital, or of a capital nature.

The use of the phrase 'to the extent' in section 8-1 means that there are circumstances where expenses may be deductible only in part if incurred in gaining or producing assessable income as well as for some other use, object or purpose.

It is the objective relationship between your expense and your income-producing activities which usually determines whether the expense is incurred in gaining or producing assessable income. Where expenses have distinct and severable parts, and some are for an income-producing purpose and others are for some other purpose, you apportion the expense according to its particular purpose (paragraphs 81-83 of TR 2024/3).

In your case there is no incidental purpose of the self-education expenses your incurred and they were wholly incurred in the gaining or producing of your assessable income. Therefore, there was no private or domestic nature to your expenses as you were working as an Enrolled Nurse when you incurred the expenses and they are not precluded from being deductible under section 8-1 of the ITAA 1997 (example 15 of paragraph 71 of TR 2024/3).

Self-education expenses are not incurred in gaining or producing your assessable income if either of the following exclusions apply:

•                     The self-education will enable you to get employment, to obtain new employment or to open up a new income-earning activity. This includes studies relating to a particular profession, occupation or field of employment in which you are not yet engaged. These expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income (exclusion 1).

•                     You are not undertaking income-earning activities to derive assessable income at the time you incurred the expenses. These expenses are not connected to any income-earning activity at the time they are incurred (exclusion 2).

Neither of these exclusions contained in paragraph 23 of TR 2024/3 are relevant to your circumstances and do not preclude the deduction from being allowed. Your self-education expenses of $XX are therefore deductible under section 8-1 of the ITAA 1997 for the 2022-23 income year.

Inconsistent rulings

Section 357-70 of Schedule 1 to the TAA 1953 provides:

357-70 Commissioner may apply the law if more favourable than the ruling

(1)           The Commissioner may apply a relevant provision to you in the way it would apply if you had not relied on a ruling if:

(a)           doing so would produce a more favourable result for you; and

(b)           the Commissioner is not prevented from doing so by a time limit imposed by a * taxation law.

You have received an unfavourable private ruling on DDMMYYYY in relation to the deductibility of the course fee's associated with a bachelor's degree that you incurred while being employed as an Enrolled Nurse with the organisation.

The ruling provided that the total expenses of AU$X were not an allowable deduction. The Commissioner has reviewed this decision and decided that the ruling did not provide the correct answer. This ruling is therefore inconsistent with the ruling issued on DDMMYYYY.

Where there are inconsistent rulings, section 357-75 of Schedule 1 to the TAA 1953 would operate to cause the later ruling to not have been made. Section 357-70 of Schedule 1 to the TAA 1953 operates as an exclusion to this rule where the later ruling prevails to the extent that it would produce a more favourable result for you and the Commissioner is not prevented from doing so by a time limit imposed by a taxation law.

As this ruling provides that the costs of AU$X are deductible under section 8-1 of the ITAA 1997, this is otherwise more favourable than the ruling issued on DDMMYYYY and therefore subsection 357-70(1)(a) of Schedule 1 to the TAA 1953 is satisfied.

Subsection 357-70(1)(b) of Schedule 1 to the TAA 1953 provides that where the Commissioner is prevented from amending an assessment by a time limit imposed by a taxation law the section cannot apply. For the income year ending DDMMYYYY the time limit for amending an assessment is governed by section 155-35 of Schedule 1 to the TAA 1953 and that section provides that the period of review starts on the date the Commissioner first gives notice of the assessment to you under section 155-10 of Schedule 1 to the TAA 1953 and ends on the last day of the period 4 years starting the day after that day.

The time limit imposed on the assessment for the year ending DDMMYYYY would expire no sooner than DDMMYYYY and as this ruling is before that date, the Commissioner is not precluded from applying section 357-70 to the AU$X deduction in a way that is a more favourable result than the original ruling.

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