Edited version of private advice

Authorisation Number: 1051527210474

Date of advice: 6 June 2019

Ruling

Subject: Income tax: deductions: work-related self-education expenses

Question

Am I entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for expenses incurred in undertaking a Bachelor of Laws?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts and circumstances

You are employed.

You wish to advance your career. In order to do so, you need to have a better understanding of law.

You are undertaking a Bachelor of Laws (LLB).

Your employer advises that the LLB may open up potential leadership opportunities.

You advise that some of the units assist you in maintaining and improving your skills and knowledge in your current role.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business explains how this provision applies to self-education expenses. Paragraphs 13-15 of TR 98/9 states that:

13. 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, the self-education expenses are allowable as a deduction.

14. 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, the self-education expenses are allowable as a deduction.

15. The fact that the study will 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) is not a sufficient basis in itself for self-education expenses to be deductible. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

You are currently employed in a managerial role. You advise that some of the units assist you in maintaining and improving your skills and knowledge in your current role. However, you concede that your predominant purpose in undertaking the LLB is to advance to a Deputy CEO role. This is a position which is supported by your employer.

We consider that your circumstances are similar to those in Case Z1 92 ATC 101; AAT Case 7541 (1991) 22 ATR 3549. In that matter, a public service clerk studying for a law degree later obtained a legal officer position in the public service. Such expenses of self-education were incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

In the matter of Case V132 88 ATC 842, a librarian was denied a deduction for the cost of a computer science course because it involved a new field of employment. Although it may have been advantageous for his employers, and even though they may have encouraged it, the lack of the new qualification would not have prejudiced his income-earning prospects in his present position.

We consider that a similar situation applies to you; whilst the LLB is supported by your employer, the lack of such a course does not prejudice your current employment. The LLB is opening up a new course of employment for you and accordingly, is not deductible under section 8-1 of the ITAA 1997.