Edited version of your written advice

Authorisation Number: 1012812472027

Ruling

Subject: Work related expenses - self-education

Question

Are you entitled to a deduction for self-education expenses?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2016

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You completed a Bachelor degree in 20XX.

You found it difficult to obtain work in the role you wanted (Job B) as further qualifications were required.

You are currently employed in Job A in a related field to Job B.

You are currently undertaking further studies at an Australian University.

By completing the Masters it will allow you to obtain work in Job B.

Post further studies, you will be eligible for full membership with the field's professional body.

You have been performing voluntary work to increase your skills and knowledge so on completion of your further studies, you will have the necessary skills to move straight into Job B.

You are not studying on a post-graduate level to remain in Job A, you are doing so to work in Job B.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Self-education 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 to the extent to which they are incurred in gaining or producing assessable income, except to the extent to which they are capital, private or domestic in nature.

To be deductible under this section an expense must have the essential character of an expense incurred in gaining or producing assessable income or, in other words, of an income-producing nature.

The Commissioner's 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 are allowable if:

• a taxpayers 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, and

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

Costs of self-education are not deductible if the study is to enable a 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). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. In such situations the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income [see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161].

In the Administrative Appeals Tribunal case Pujara v. Federal Commissioner of Taxation (2003) AATA 331 (Pujara's case), the taxpayer was enrolled in a Masters of Business Operations Management course at the University of Western Sydney.

The purpose of the course was to provide advanced theoretical and practical skills in managing quality in a business organisation, including logistics management and statistical process control.

The taxpayer was also employed part-time as an assembler store person for a pharmaceuticals company. His duties included the manual assembly of orders, updating records of bulk stock and assisting with stock distribution.

In denying the taxpayer a deduction for his self-education expenses, the Tribunal determined at paragraph 19:

the routine nature of the applicant's activities was such that the necessary skills and performance could be maintained without further training. Objectively, the new information and learning he acquired through the Masters degree was at a higher level than he required for his position. It would not improve or tend to improve his proficiency in a relatively junior role. The "perceived connection" between the Masters degree and the applicant's activities as an assembler store person is missing. The Tribunal is not satisfied, therefore, that the expenditure on self-education during the 1998-99 year of income was incidental and relevant to gaining or producing his assessable income.

The tribunal also determined that the taxpayer's course of education was unlikely to lead to an increase in this income from his current employment.

It is considered that your case is similar to Pujara's case in that the further studies you are undertaking is at a much higher level than would be required to carry out your current duties in Job A.  Although you may gain some knowledge and skills from the subjects studied that could be of some assistance in your work, the predominant focus of the further studies is to provide the skills to open up a new income earning activity In Job B.

Therefore, you are not entitled to a deduction for self-education expenses.