Edited version of your written advice

Authorisation Number: 1012919487800

Date of advice: 4 December 2015

Ruling

Subject: Self-Education expenses

Question

Are you entitled to claim a deduction for self-education expenses in relation to undertaking your Masters studies?

Answer

No

This ruling applies for the following period

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The scheme commenced on

1 July 2015

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: 

• the application for private ruling,

• copy of your course details.

• copy of your CV

You are currently employed in a particular field.

You intend in undertaking a Masters course.

You plan to start this course mid-year and the course will carry forward for 18-24 months on a part time basis.

Assumption(s)

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

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. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

Similarly, if 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 his or her current income earning activities in the future, a deduction is allowable.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

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. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances.

In Case U101 87 ATC 616 the Administrative Appeals Tribunal (AAT) considered the deductibility of expenditure on personal development courses. Case U101 concerned a taxpayer who was employed as a Taxation Office inspector. He undertook a course on communication, clear self-expression and work organisation. The course was not formally recommended or encouraged by his employer but the taxpayer considered it would assist him to carry out his work more efficiently.  

His Honour J Purvis denied the claim and held that there was not a sufficient nexus between the expenditure in pursuing the course and the taxpayer's employment.

In your case there is not sufficient nexus between the expenditure and your income earning activity. Whilst the course may broaden your knowledge and professional skills, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the expenses and your income producing activities.

The course is considered to be too general and is not regarded as being incurred in gaining or producing assessable income. Therefore, a deduction is not allowed under section 8-1 of the ITAA 1997.