Edited version of private advice

Authorisation Number: 1051621822803

Date of advice: 6 January 2020

Ruling

Subject: Work Related Expenses: Self-Education

Question

Are you entitled to a deduction for course fees and the cost of textbooks whilst studying an honours program (Subject A) at an Australian University?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2019

The scheme commenced on:

1 July 2018

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an international student studying an honours program (Subject A) at an Australian University.

The units you studied are listed below together with the "link to employment" you argued to establish a nexus between each unit and the duties of your current position.

You believe that these studies improved skills relevant to your position.

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 Taxation Ruling 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business 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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education.

Paragraphs 33 and 34 of TR 98/9 are particularly relevant -

33. The High Court of Australia has indicated that the expenditure must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; Hayley v. FC of T (1958) 100 CLR 478 at 497-498; (1958) 11 ATD 404 at 412). There must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of the assessable income (Ronpibon Tin NL v. FC of T (1949) 78 CLR 47 at 56; (1949) 8 ATD 431 at 435).

34. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. FC of T (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91). Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case.

The essential character of the expenses you wish to claim is that they were incurred to enable you to enhance your ability to perform your current employment and, possibly, to allow you to increase your income by enhancing your skills and your ability to perform your current duties.

Based on the evidence available in support of this application it is considered that the subjects you studied have insufficient connection to the skills or knowledge used in your current income earning activity. These units have less application to your current duties and therefore it is considered that insufficient evidence exists to establish a nexus between these units in your degree and your work duties.

In particular you are only required to "Assist Client managers care for clients". Client care is clearly the main obligation of Client Managers. Your duties would therefore be restricted to an important but necessarily supportive role. The argument provided to justify these studies (namely "advising clients") is therefore judged to be insufficient as to establish a definitive nexus between these studies and your current work duties.

Accordingly it is considered that while the course is useful in your current employment, it does not have a sufficient nexus with your current employment duties as to justify deductibility. Consequently, your self-education expenses for units in your honours program are deemed to be insufficiently connected to your employment and their costs are therefore not deductible under section 8-1 of the ITAA 1997.