Edited version of private advice

Authorisation Number: 1051789264596

Date of advice: 14 December 2020

Ruling

Subject: Self-education

Question 1

Are you entitled to a deduction for course fees whilst studying with a Training Company?

Answer

No

Question 2

Does the course have sufficient connection to your work activities as to establish a nexus between your studies and your current employment. This course focused on -

•         Executive coaching and mentoring

•         How to build a portfolio career - consulting, equity investing and start-ups

•         Building a strong personal brand for the purposes above

•         Identifying and building strong networks for the purposes above

•         Conversation skills in reaching this network

•         Weekly coaching.

The ultimate purpose of this course was to improve your skills in creating a portfolio career and building your profile with targeting of local businesses. The course provided extensive skills on how to position yourself for the conversation, how to build a personal and business network, as well as providing one to one coaching with weekly sessions.

At the commencement of study, you were working for a start-up company that distributed innovative products from an overseas company. As this was a start-up it required net outgoing investment from yourself and other founders to gain scale and market success. Future income was based on market success via marketing the product to target firms in hospitality and retail.

The course provided extensive skills on how to position yourself for conversations and how to build a personal and business network. It provided one-to-one coaching with weekly coaching sessions.

These weekly coaching sessions were designed to help you develop the skills and knowledge to develop a network of potential work opportunities. The course provided extensive skills on how to position yourself for a business conversation and how to build a personal and business network.

You do not have a formal duty statement for any of the roles you occupied while studying this course however you have supplied a list of duties and responsibilities for all roles you occupied during the period of study. Your description of roles and responsibilities for each position includes -

Entity A

•         Distributing innovative products from an overseas company

•         Future income would be based on market success selling the product to target hospitality and retail customers

•         Develop the strategy and direction for the business

•         Work with the Sales Team to execute the strategy.

Entity B

•         Build a new JV between Entity B and Entity D across Australia

•         Market and competitor review

•         Identify services to be offered

•         Workshops to agree on scope of services

•         Build business case (and financials) for organic and inorganic acquisition growth

•         Develop technology blueprint for online marketplace model

•         Design organisational model and roles

•         Develop funding plan for each partner

•         Shareholders agreement.

Entity C

•         Identify the technology and customer experience strategy for a redevelopment project

•         Prepare business principles

•         Identify key partners

•         Develop technology strategy jointly with key partners - review of mobile coverage, audio, visual (video boards, TV, speaker system), lighting, overall stadium network connectivity, WIFI, ticketing, transport links, etc.

•         Approval of strategy

•         Work with partners on cost to deliver - negotiate costs

•         Understand gap to budget envelope

•         Work on gap closure by working with partners on co-funded options i.e. sponsorship opportunities

•         Present final recommendations to Executive

•         Announcement made.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

In general terms, self-education expenses incurred in attending educational institutions are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) where the expenses have the necessary connection in gaining or producing the taxpayer's assessable income.

For a deduction of self-education expenses to be allowable you also need to meet the following governing principles contained in Taxation Ruling 98/9 - Income tax: deductibility of self-education expenses incurred by an employee or a person in business (TR 98/9).

a)    The 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.

b)    The study of a subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayer's income from his or her current income-earning activities in the future.

Types of self-education expenses allowable

Under TR 98/9, subject to the general tests under section 8-1 being met, the following types of expenses related to self-education are allowable:

a)    course or tuition fees of attending an educational institution, work-related conference or seminar, including student union fees;

b)    the cost of professional and trade journals, textbooks and stationery;

c)    airfares incurred on overseas study tours or sabbatical, on work-related conferences or seminars, or attending an educational institution. They are part of the necessary cost of participating in the tour, etc.;

d)    subject to paragraph 24(c) of this Ruling, where a taxpayer is away from home overnight, accommodation and meals expenses incurred on overseas study tours, on work-related conferences or seminars, or attending an educational institution; and

e)    interest incurred on borrowed monies where the funds are used to pay for self-education expenses associated with a course of education, that enables a taxpayer to maintain or improve his or her skill or knowledge or is likely to lead to an increase in income from the taxpayer's current income-earning activities. Regard must be had to the connection between the interest expense and the income-earning activity in each income year interest is claimed because a change in circumstances, for example, a change of employment, may mean that the necessary connection no longer exists.

Application to your circumstances

In your situation we are satisfied that you have a genuine desire and need to maintain or improve your skills and knowledge as a consultant. The course undertaken, and the activities completed are designed to improve your skills in creating a portfolio career and building your profile with businesses.

Despite a lack of written duty statements for the 3 positions you occupied while undertaking this course you have supplied lists of duties and responsibilities for each position. None of the positions involved "creating a portfolio career" and/or "building your profile" as these positions were focussed on meeting specific goals for the organisations which employed you, whereas the course was focussed on improving your career and building your profile.

There is no identifiable nexus or connection between the course and your duties in any of these 3 positions.

While the course undertaken may be useful to your current employment (and possibly to the other business consulting roles after the current role) it has insufficient nexus with your employment duties as to justify deductibility.

Consequently, your self-education expenses for the course are insufficiently connected to your employment. The costs are therefore not deductible under section 8-1 of the ITAA 1997.