Edited version of private advice

Authorisation Number: 1051759029329

Date of advice: 28 September 2020

Ruling

Subject: Self-education

Question

Are you entitled to a deduction for fees and costs while studying for a degree at university?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed by Company A, where you work with a diverse range of clients many of whom are disengaged with society or have a diagnosed disability.

You undertook a degree at a nearby university. You incurred fees and costs.

The units you studied are listed below. You provided evidence to establish a nexus between each unit and your current duties. You argue that upgrading of qualifications and skills sets is helpful in your current duties.

You paid the tuition fees directly to the university.

You incurred fees of $X and costs of $Y in the 20XX financial year.

You incurred fees of $X2 and costs $Y2 in the 20XX financial year.

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.

Based on the evidence available in support of this application the subjects you studied have a direct and sufficient connection to the skills or knowledge used in your current income earning activity. These units have application to your current duties and therefore there is a nexus between these units in your degree and your work duties.

The course is both useful in your current employment and has sufficient nexus with your current employment duties to be deductible.

Your self-education expenses for units in your degree are sufficiently connected to your employment and their costs are therefore deductible under section 8-1 of the ITAA 1997.

$250 Reduction

Self-education expenses are broken into five categories. If all of your self-education expenses are 'category A' items, then you have to reduce your deduction by $250.

In your situation the expenses all fall into category A and hence are all deductible but must be reduced by $250. For further details on this search for Quick Code QC 16918 in the search box of the Australian Taxation Office website.