Edited version of your written advice

Authorisation Number: 1012675459588

Ruling

Subject: Self-education

Question

Are you entitled to a deduction for self-education expenses incurred, while in your present role, that will increase your income and improve skills relevant to your current income earning activities?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You incurred expenses during the year relating to your education.

Upon achieving the qualification, you expect your taxable income will increase in your current role and will raise opportunities for securing new employment.

Your income will significantly increase. You expect this increase to commence from the second half of the current financial year, at absolute latest by the beginning of the next financial year.

Your current role will not change, but the scope of work you undertake will, given you will have expanded your ability to do greater amounts of work.

Relevant legislative provisions

Income Tax Assessment Act 1997 (ITAA 1997) section 8-1

Reasons for decision

Summary

You are able to claim self-education expenses because the expenses are incurred assist you to maintain or improve skills relevant to your current role, and will significantly increase your income from your current income earning activities.

Detailed reasoning

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, self-education expenses will not be deductible if the study is intended to:

• enable you to get employment

• enable you to obtain new employment

• to open up a new income-earning activity (whether in business or in your current employment).

Paragraph 48 of TR 98/9 refers to the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 (Maddalena's Case). That case established that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. The expenses would be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

In your case, it is not a condition of your current role to hold this qualification and it could open up a new income earning activity for you. Self-education expenses will not be deductible if the study is intended to open up a new income-earning activity (whether in business or in your current employment).

However, although there is the inherent possibility that you could secure new employment, the qualifications you will obtain upon completion are directly transferrable to your current employment role.

Your current role will not change upon obtaining your qualification; rather the scope of work you undertake will increase significantly. Since the duties that you perform are based on the exercise of a skill or some specific knowledge, the completion of your study enables you to improve that skill or knowledge for your current income-earning activity.

Additionally, the study you are undertaking will significantly increase your taxable income in the near future.

Accordingly, you satisfy the two requirements for the deductibility of self-education expenses. Although your study will also assist you in the eventual securing of alternative employment, it can be said that your expenses are being incurred in the course of gaining or producing your current assessable income.

You are therefore able to claim self-education expenses under section 8-1 of the ITAA 1997 because the expenses are incurred assist you to maintain or improve skills relevant to your current role, and will significantly increase your income from your current income earning activities.