Edited version of your written advice

Authorisation Number: 1051410732314

Date of advice: 7 August 2018

Ruling

Subject: Self education expenses

Question

Are you eligible to claim a deduction for self-education expenses for your Masters course?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 February 20XX

Relevant facts and circumstances

You are an Information Technology graduate.

You commenced a Masters course at a University course, which you subsequently completed.

You paid course fees over two income years

You commenced paid employment in a casual role as a lecturer, tutor and unit manager while studying at the University.

Prior to this employment you were employed part-time in an unrelated field and have continued this employment.

After completing the course, you applied for and found higher paying, full time employment with a different employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

Your self-education expenses for your Masters course are not deductible because these expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Detailed reasoning

Some self-education expenses are deductible under section 8-1 of the Income Tax Assessment Act 1997.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business sets out how section 8-1 applies to a variety of situations involving self-education expenses.

In accordance with paragraphs 13 and 14 of TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 if:

● a taxpayer’s income earning activities are based on the exercise of a skill or some specific knowledge, and the course of self-education enables the taxpayer to maintain or improve that skill or knowledge; or,

● the study of a course of self-education objectively leads to, or is likely to lead to, an increase in a taxpayer’s income from their current income earning activity in the future.

Therefore, provided there is sufficient connection between your course of self-education and your current income earning activities, you are entitled to claim a deduction for your self-education expenses.

However, as stated in paragraph 15 of TR 98/9, self-education expenses will not be deductible if the study is intended to:

● enable you to get employment,

● enable you to obtain new employment, or

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

Paragraph 57 of TR 98/9 provides an example of where self-education expenses in relation to a casual role where relevant studies must be pursued are incurred at a point too soon for those self-education expenses to be deductible:

Example: Shannon, who is undertaking a 4-year university degree in mining engineering, takes a job as a casual employee with a mining company during the end of year holiday period. It is the company's policy to take only students who are pursuing relevant studies. Shannon is not entitled to a deduction for the cost of the course because the study is designed to get future employment in the field. It is incurred at a point too soon.

You commenced the Masters course early on in a calendar year. However, you did not commence employment as a lecturer, tutor and unit manager in the field at the University until some months later.

Your new role after completion of the Masters course represents new employment and as such is not a sufficient basis in itself for self-education expenses to be deductible.

Your case is similar to the example at paragraph 57 of TR 98/9. You undertook a study course for the purpose of upgrading your existing qualifications. The course cannot be said to have been undertaken to improve or maintain a specific skill or knowledge in a current income earning capacity, as you were not employed as at the university or with your subsequent employer while undertaking your course of education. The essential character of the expenses is that they were incurred to enable you to complete the course of education and earn assessable income from your future employment.

Therefore, the Commissioner considers that your self-education expenses were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.