Edited version of your private ruling

Authorisation Number: 1011944860796

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Ruling

Subject: Self education expenses

Question

Are you entitled to a deduction for self education expenses?

Answer: No.

This ruling applies for the following period

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You are currently employed as the manager of a hospital emergency department.

You are a qualified nurse.

You are undertaking study for the degree of bachelor of Law.

You believe that the majority of units are directly relevant to your present role and will provide you with greater skills.

Upon completion of the degree you intend to obtain employment in a legal advocacy/defence advisory role within the health service industry.

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for a loss or outgoing incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purposes of gaining or producing assessable income.

However, no deduction is allowed for losses or outgoings to the extent to which they are of a capital, private or domestic nature or are incurred in gaining or producing exempt income, or are otherwise prevented from being deductible by a specific provision of ITAA 1997.

For any deduction to be allowable under section 8-1 of the ITAA 1997 you must be able to demonstrate that there is a real and direct connection between the outgoing and the gaining of your assessable income, so that the outgoing is incidental and relevant to the actual activities that gain assessable income.

Self-education

The Commissioners view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9.

In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 if:

· your income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables you to maintain or improve that skill or knowledge

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

If neither of the above tests is satisfied, expenses of self-education will not be deductible if the study is to enable you to:

· get employment,

· to obtain new employment

· to open up a new income earning activity.

Paragraph 42 of TR 98/9 states that 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.

Factors used to determine the connection between a particular outgoing and the way a taxpayer more directly produces their assessable income include whether the outgoing is incidental and relevant to the gaining of their assessable income, whether the outgoing has the essential character of business expenditure and whether the outgoing is an express or implied condition of their employment.

In general, where a person undertakes a course of self education, a deduction will be allowable where that person is already qualified or skilled in a particular profession and the purpose of the education is to maintain or improve that professional knowledge and skill.

Expenses intended to enable the taxpayer to practise in another area will not be allowable deductions.

Your income earning activity is that of a hospital emergency department. The essential qualifications for your role are medical and managerial skills but you also require business acumen.

Your study of law does not have a sufficient necessary connection to maintaining or improving your skill or knowledge as emergency department manager.

Whilst acknowledging controlling legal costs and negotiating lease conditions are part of the myriad of supportive tasks in managing a business, we do not accept obtaining a Bachelor of Law is required to fulfil these tasks.

For example, on 12 July 1984, the Board of Review (Case R60, 84 ATC 447) disallowed self education expenses finding a public servant could not claim a deduction for self education expenses in continuing his university studies towards a law degree. The taxpayer's position required relevant experience or some legal training (which the taxpayer already had) but not legal qualifications as such. In the circumstances, the continuation of the taxpayer's legal studies could not be characterised as a relevant incident of or as part and parcel of his employment.

Or similarly, on 2 December 1991, Administrative Appeals Tribunal (Case Z1, 92 ATC 101) disallowed self education expenses regarding a public service clerk who had completed an external course in legal studies but was not eligible for appointment as a solicitor unless she was admitted to practise. In order to do so she had to complete a six-month course at the College of Law and to be formally admitted to the Supreme Court of New South Wales. The pre-admission expenses were not deductible as they were not part and parcel of the taxpayer's employment. The tribunal ruled for expenses to be deductible they must be incurred in gaining assessable income and must be incidental and appropriate to the taxpayers employment; that the taxpayer must show that there was an explicit or implicit condition that the expenses be incurred. At all times the taxpayer was employed in a position where qualifications as a solicitor were not necessary although the gaining of such qualifications were encouraged. The pre-admission course was pursued by the taxpayer of her own choice and for her own self-improvement.

Your situation is similar to the above examples in that while legal qualifications may assist you in your current employment duties to some extent, a legal qualification is not a necessary explicit or implicit requirement of your profession.

Furthermore, your ruling application states the study is being undertaken to allow you to obtain new employment in a legal advocacy/defence advisory role in the health service.

Conclusion

Your self education cost incurred in the study of a bachelor of law degree is not a deductible expense because there is not a sufficient connection or nexus between that field of skill and knowledge and your present role and are being undertaken to obtain new employment.