Edited version of private advice

Authorisation Number: 1052080648060

Date of advice: 8 February 2023

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for work related self-education expenses for a Spanish language course?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work in a specialist field.

You regularly interact with employees in Country X as part of your role. You have provided a letter from a colleague to confirm this.

You believe that speaking another language more fluently would assist in your career progression and income earning capacity.

You intend on travelling to Country X to undertake a language course at a language school.

The language course will be held over several weeks.

You intend to pay for your flights, accommodation, food and for the language course.

The language school offers one on one tutoring each day.

The language school offers the course for between four and six hours per day.

Although your employer supports your decision to undertake the course at your own expense, your employer has not directed you to undertake the course.

You intend to move into a new role once you have completed the language course.

The completion date for the Spanish language course is 30 June 20XX.

You have not found a similar course within Australia that is cost effective and of a high quality.

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 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).

Similarly, 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 their current income earning activities in the future, a deduction is allowable.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161 and paragraphs 15, and 48-62 of TR 98/9).

In your case your stated objective in undertaking the study is to move into a different role once you have completed your language course. Therefore the purpose of the language course is to open up a new discrete income earning activity and comes at a point too soon to be deductible under section 8-1 of the ITAA 1997.

Furthermore, the connection between the language course and your duties in your current role are too remote to provide the required connection between the study and your current income-earning activities.

Accordingly, you are not entitled to a deduction for the expenses you incur in respect of the study.