Edited version of private advice

Authorisation Number: 1051894480057

Date of advice: 3 September 2021

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a self-education deduction for the costs associated with a Graduate Diploma in a specialist area?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed as a professional in the medical area.

You will continue to work in the same area goingforward.

Current position is of a general nature.

The diploma is in a specialist area and you intend on opening your own business in this area in the future.

The expenses you wish to claim are:

•         Course Fees

•         Books

Your employer is not contributing financially to the costs associated with your study.

You are a full fee-paying student.

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 diploma that could be of some assistance in your work as a professional, the predominant focus of the course is designed to open a new income earning activity, that of a specialist area of nursing. It is considered that there is an insufficient connection between the skills and knowledge required in your duties as a professional and the diploma.

The diploma enables you to develop competency in the knowledge areas and professional skills required to be obtained prior to you obtaining work in this specialised area.

Your intention is to open your own business in this area in the future.

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 as a professional. You are therefore, not entitled to a deduction for self- education expenses.