Edited version of private advice

Authorisation Number: 1051931375137

Date of advice: 25 February 2022

Ruling

Subject: Deductions - self education expenses

Question

Are your self-education expenses for the course allowable deductions with respect to having sufficient connection with producing your assessable income?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You enrolled in a course on a full-time basis.

At the time of enrolment, you worked in a role with your employer.

Early in the course you shifted roles and employers.

You have changed employment and now are employed with your current employer on a permanent full-time basis.

You incur expenditure for tuition fees in relation to your studies.

You complete study during your own time, however, you have been given additional study leave for exams.

Upon completion of the course this will allow you to take on additional company research and management responsibilities with an expected increase in salary to match the growing seniority of the role.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

Your training is not sufficiently connected to your employment duties at the time of training. Therefore, no deduction is allowed for the costs of the training.

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.

The deductibility of self-education expenses falls for consideration under section 8-1 of the ITAA 1997. Therefore, in considering whether you are entitled to a deduction, it is necessary to consider whether the expenses were incurred in the course of gaining or producing your assessable income.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 56 ALR 785; (1949) 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing the assessable income" mean in the course of gaining or producing such income.'

Taxation Ruling TR 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).

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 up a new income-earning activity (whether in business or in the taxpayer's current employment). The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. They are incurred in getting, not in doing, the work which produces the income (High Court decision in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 (Maddalena's case)).

In the case of Assefa v FC of T [2009] AATA 2 (Assefa's case), it was considered whether studying a course of education in order to advance to a higher classification of nursing was opening up a new income earning capacity. The taxpayer in this case was employed as an assistant in nursing and a care service employee while studying a Bachelor of Nursing degree.

The Administrative Appeals Tribunal held in Assefa's case that no deduction was allowable for the self-education expenses. It was determined that there was a significant difference between the position of enrolled nurse and registered nurse on one hand, and personal care assistant/nursing assistant on the other. The taxpayer was not considered to be incurring the expenditure in gaining or producing her assessable income, but was studying towards their initial qualification as a registered nurse.

Therefore, these expenses are not deductible under section 8-1 of the ITAA 1997.