Edited version of private advice

Authorisation Number: 1052120398630

Date of advice: 20 June 2023

Ruling

Subject: Work-related self-education courses - deductions

Question 1

Are the expenses incurred by completing self-education course A deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes - this course is deductible under section 8-1 if the ITAA 1997.

Question 2

Are the expenses incurred by completing self-education course B deductible under section 8-1 of the ITAA 1997?

Answer

Yes - this course is deductible under section 8-1 of the ITAA 1997.

Question 3

Is the expense incurred by completing self-education course C deductible under section 8-1 of the ITAA 1997?

Answer

No - this course is not deductible under section 8-1 of the ITAA 1997.

This private ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

In August 20XX you commenced employment as a full-time geologist at employer A. This position concluded in November 20XX. You then accepted a new position on as a full-time geologist at employer A in a supervisory role commencing November 20XX. You held this role until April 20XX.

In January 20XX you undertook the following three online courses with an online Education and Training company, completing all three by June 20XX.

At the time of completion of all three courses you were employed as a geologist at employer A in a full-time capacity.

You have outlined the skills you believe you obtained as a result of these courses being:

Course A

•         Consider academic leaderships theory, such as leaderships styles; authentic leadership/servant leadership etc, when supervising entry level geologists and contractors.

•         Learn types of motivation (intrinsic versus extrinsic) and how embed that understanding into daily actions to motivate a very diverse group of geologists.

•         Self-evaluate your emotional intelligence (EQ) and obtain 360° feedback from peers and former peers.

•         Understand and apply the difference between leading people and managing people.

•         Resolve problems by making your leadership situational, e.g., varying approach to different scenarios in the location and where necessary the Head office team etc.

•         Continuously improve your leadership style as a (relatively) inexperienced supervisor

Course B

•         Consider six sigma, lean, and continuous improvement when considering day-to-day operations, e.g., drilling, and geophysical operations.

•         Assess (and re-assess) personnel formalisation, e.g., safe work procedures and policies

•         Monitor the effectiveness of new ideal and continually evaluate risk/critical risk to workers on site when operational systems are changed.

•         Become a more strategic thinker as a project geologist, thinking critically from a more high-level viewpoint, e.g., benchmarking against other departments or mine sites.

Course C

•         Considering promotional material, e.g., job adverts, in the context of the current market in mining

•         Consider the reputational impact of poor/good marketing strategies

•         Writing procedures and marketing themes

•         Rolling out safety campaigns, e.g., focus on mental health or upcoming cyclones; the target audience is both internal and external

•         Use innovation when marketing ideas and campaigns internally/externally

Your employer encouraged self-education outside of office hours however no remuneration was offered, and you incurred the total cost of the three courses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Questions 1 and 2

Are the expenses incurred by completing courses A and B deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Summary

There is sufficient nexus between the expenses you incurred as a result of completing course A and course B and your income-earning activities at the time of study to make it deductible under section 8-1 of the ITAA 1997

Detailed reasoning

Section 8-1 of 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 (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. Self-education expenses are deductible where:

•         the taxpayer's income-earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge, or

•         the study of the subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayers' income from their current income-earning activities in the future.

In your case, it is accepted that these courses meet the requirements detailed in TR 98/9 therefore you are entitled for a deduction for work related self-education expenses.

Question 3

Is the expense incurred by completing course C deductible under section 8-1 of the Income Tax Assessment Act 1997?

Answer

No.

Summary

There is insufficient nexus between the expenses you incurred as a result of course C you undertook and your income-earning activities at the time of study to make them deductible under section 8-1 of the ITAA 1997. It is not a requirement of your current role as a supervisor Project Geologist for you to undertake study relating to course C.

Detailed reasoning

Section 8-1 of the (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 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the ITAA 1997 (TR 2020/1) sets out when an employee can deduct a work expense under section 8-1 of the ITAA 1997. The pivotal element of section 8-1 of the ITAA 1997 for work expenses is the requirement that expenses be incurred 'in gaining or producing assessable income'.

Paragraph 22 of TR 2020/1 provides:

'...the requirement that expenses be incurred in the course of producing assessable income means that it is not enough to show only that there is some general link or causal connection between expenditure and the production of income. The expenditure must have a sufficiently close connection to performance of the employment duties and activities through which the employee earns income.'

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (TR 98/9) further sets out the circumstances in which self-education expenses are allowable as deductions where the entitlement to income arises from employment or business.

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 (paragraph 13 of TR 98/9).

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 (paragraph 14 of TR 98/9).

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). This includes studies relating to a particular 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 (paragraph 15 of TR 98/9). They are incurred in getting, not in doing, the work which produces the income. This is further outlined in the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541).

In your case, we consider that the completion of the course C does not align with the skills and specific knowledge of your role as a supervising project geologist. Therefore, the course does not have the necessary nexus with your employment and as such, the expenses incurred are not tax deductible.