Edited version of private advice

Authorisation Number: 1052125948505

Date of advice: 5 June 2023

Ruling

Subject: Deductibility for self-education expenses

Question

Are you entitled to claim a deduction for self-education expenses?

Answer

Yes.

Section 8-1 of the Income Tax Assessment Act 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 (TR 98/9) 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 his or her current income earning activities in the future, a deduction is allowable.

It is accepted that your studies will maintain or enhance the skills that are required in the performance of your employment. They have resulted in increases in your taxable income from your current and former employers. Your self-education expenses are considered to have the relevant connection to your current income earning activities. In addition, you have the necessary receipts to substantiate your claims. Therefore, expenses incurred in relation to your studies are considered allowable as a deduction under section 8-1 of the ITAA 1997 for the income years in which they were incurred.

This ruling applies for the following periods:

30 June 2021

30 June 2022

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You are employed on a part-time. During the period to which this ruling relates, you changed employers but retained the same position. As of July 20XX, you were employed by Employer 1 in a senior position, and in September 20XX commenced working for Employer 2 in the same role.

While you specialise in one capacity, technical expertise is one of many skills required. Your responsibilities and capabilities which cover a broad range of business, managerial and leadership skills. Greater proficiency in these skills is required for promotion to more senior levels or to support salary increases.

The job description for your role at Employer 1, your responsibilities were generally consistent with the details provided for your role at Employer 2, with the key difference being a vastly different scale of business environment.

At this stage, upon completion of the studies, you hope to continue your current work and expect to be progressing towards or to be working in the role of a more senior position.

You are undertaking a course of study at a University. You are undertaking the course to enhance your leadership, management, and communication skills, and to gain a deeper appreciation of the business context that your employer and its clients operate in and to be more effective in servicing clients. You commenced the course in 20XX. You anticipate completing it in 20XX.

During the income years of the ruling, you funded the entire cost of the studies from your own salary. You did not receive financial assistance. You did not otherwise receive an allowance or was reimbursed by anyone for expenses incurred in relation to your studies.

Employer 2 has a study leave and allowances policy that can provide support for approved study programs. Your previous employer, Employer 1, supported your application to commence the studies, with your immediate supervisor providing supporting letters that accompanied your application into the studies program.

You have received a pay rise partly due to taking up the course and the course will at least maintain and likely improve your skills or specified knowledge required for your role. You will have more chance of a pay rise in the future once the course is completed.

For the 2021 income year you undertook the following studies and incurred the following expenses

Subject 1 $X

Subject 2 $X

For the 2022 income year you undertook the following studies and incurred the following expenses

Subject 3 $X

Subject 4 $X

You have receipts to substantiate these expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1