5010072797967 | Legal database

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Edited version of private advice

Authorisation Number: 5010072797967

Date of advice: 29 April 2021

Ruling

Subject: Self-education expenses

Question

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

Answer

No.

Question

Can you claim for the cost of those courses within the qualification curriculum, that have a direct relevance to your current role?

Answer

Yes.

This ruling applies for the following period(s)

Year ended 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

You have a bachelor's degree in another field.

You are employed as a high level manager of a large company (The Company) with a large annual turnover.

Your role requires you to be accountable in the following areas:

• Health, Safety, Environment and Quality

• Risk Management

• Human Resources and Industrial Relations

• Leadership Responsibilities

• Scope Management

• Commercial Management and

• Cost Management.

You are authorised to:

• Recruit and terminate personnel

• Delegate responsibilities

• Approve capital expenditure

• Act on behalf of your Employer as an authorised signatory for Tender submissions and

• Represent the Managing Director when responding to Media.

You have been in your current role for a considerable amount of time.

During your tenure the business has grown to the point that the legal risks and compliance requirements has increased in complexity, meaning that a greater understanding of the law is required.

Your role requires you to be proficient in the following areas of law:

• Contract and commercial negotiations

• The Company's current litigation and claims

• The Company's compliance of all relevant local, state and federal law

• The Company's general and civil liabilities which includes claims made against the company

• Industrial criminal law in that this relates to industrial manslaughter and injury within the workplace and

• Industrial workplace relations and law.

You are enrolled at an Educational Institution

You have expended $X in tuition fees for these courses.

You are claiming for the costs of only the courses that have a direct relevance to your current role.

The course will develop your current skills and knowledge in legal issues to an advanced level and provide an in depth understanding of developing and managing contracts as well as how to successfully negotiate through any disputes and how to protect the company's interests.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 82A

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

You cannot claim all of your self-education expenses in obtaining the qualification as there is an insufficient connection between the qualification and your role as a high level manager. You are entitled to a deduction on the basis that there is a direct connection between the matters covered in some 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.

In FC of T v. Finn (1961) 106 CLR 60; (1961) 12 ATD 348, the High Court held that expenditure incurred by a senior government architect on an overseas tour devoted to the study of architecture was allowable under section 8-1. All three Judges recognised that the tour expenses were relevant to the activities by which Mr Finn was currently producing income. Kitto J found that the tour was incidental to the proper execution of the duties of Mr Finn's office because:

'Its professional status implied an obligation of progressive acquaintance with a living and developing art. It was, therefore, I think, plainly incidental to the office that the respondent should avail himself of such opportunities as might arise to add... to his knowledge and understanding of architectural achievements and trends overseas...'.

(106 CLR at 69; 12 ATD at 352) Windeyer J was of a similar view, stating that:

'... a taxpayer who gains income by the exercise of his skill in some profession or calling and who incurs expenses in maintaining or increasing his learning, knowledge, experience and ability in that profession or calling necessarily incurs those expenses in carrying on his profession or calling.'

(106 CLR at 70; 12 ATD at 352)

In FC of T v. Studdert 91 ATC 5006; (1991) 22 ATR 762 the taxpayer, a flight engineer, sought a deduction for expenses incurred on light aircraft flying lessons leading to a private pilot's licence. On appeal, Hill J found that the expenses were relevant and incidental to the activities as flight engineer that directly produced Mr Studdert's income. This finding was based on the facts that undertaking the lessons made him better equipped to perform his skilled job and better proficiency were a motivation for undertaking the lessons.

Paragraph 41 of TR 98/9 describes the example of Barry, a trainee accountant, who is studying commerce part-time at university. He is allowed a deduction for the costs associated with the course because the course enables Barry to maintain or increase the specific knowledge required in his current position and to carry out his duties more effectively.

TR 98/9 goes on to say that if a course of study is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist meaning that no deduction for self-education expenses would be allowable under section 8-1 of the ITAA 1997.

Application to your circumstances

The Educational Institution's course is a program for graduates of other disciplines. Although you will gain knowledge and skills from the course that will be of assistance in your work, the predominant focus of the course is for those wishing to become a fully qualified professional.

The qualification is designed to be used as a prerequisite for further professional studies.

By its very nature your role covers a broad variety of areas, including accounting, finance, law, recruitment and terminations, media relations engineering and other technical aspects of construction.

This means that the cost of the individual units within the prescribed course of study that have direct relevance to your current role are deductible.

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