Edited version of private advice

Authorisation Number: 1051796270097

Date of advice: 14 January 2021

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a self-education deduction for the costs associated with a course of education?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are employed with a company.

You commenced a course of education in early 20XX, completing this in late 20XX.

You have also held various positions with different businesses since 20XX.

These positions have allowed you to progress closer to a professional role.

In early 20XX you will commence work at a business as a professional in a salaried position.

You commenced the course of education with the intention of practising as a professional.

You cannot progress to a professional role without completing the course of education.

The expenses you wish to claim are:

•         Course fees

•         Travel

•         Stationery

•         Books

•         Parking

•         Fuel

The course was undertaken to improve the specific skills or knowledge required in your current employment at the time as a "Legal Assistant/Paralegal"

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 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.

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities.

Taxation Ruling TR 98/9 considers the deductibility of self-education expenses and states that 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.

In addition, 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.

However, no deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open a new income earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a 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.

The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that nodeduction is allowable for self-education expenses if the study isdesigned to enable a taxpayer to get employment or to obtain newemployment. Such expenses are incurred at a point too soon to beregarded as incurred in gaining or producing assessable income.

Case J30 77 ATC 282; 21 CTBR (NS) Case 52 and Case Z1 92 ATC 101; AAT Case 7541 (1992) 22 ATR 3549, deal with claims made by law clerks for admission fees to practise. The claims were disallowed as it was found that the expenses secured the applicants a 'lasting advantage' and as such, were capital in nature.

Although you may gain knowledge and skills from the course of education that could be of some assistance in your work, the predominant focus of the course is designed to open a new income earning activity. It is considered that there is an insufficient connection between the skills and knowledge required in your duties as a professional and the course of education. The course of education enables you to develop competency in the knowledge areas and professional skills required to be obtained prior to commencing professional training.

The expenses have been incurred at a point to soon to be able to qualify as a deduction in relation to self-education.

Consequently, the self-education expenses you incur do not have the necessary and relevant connection with the earning of your assessable income. You are therefore, not entitled to a deduction for self-education expenses.