Edited version of private advice

Authorisation Number: 1052176857922

Date of advice: 6 October 2023

Ruling

Subject: Self education expenses

Question

Are you able to claim a deduction for the expenses you incurred having your overseas qualifications accredited in Australia?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2023

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You are currently employed in your professional field.

You completed your studies in your professional field overseas and have relevant qualifications, which are not automatically recognised in Australia.

You have undertaken to have your overseas qualifications accredited in Australia

The accreditation you receive is the first step to allow you to be registered in Australia in a professional capacity.

Your employer has encouraged you to take steps to have your overseas qualifications recognised in Australia, however they have not assisted financially with any costs incurred in gaining your accreditation.

You believe that that the accreditation will allow you to participate in higher roles and will allow you to be part of high-scale projects, taking on more responsibilities and duties in the industry.

Your skill assessment was approved several months ago.

On completion of the skills assessment, to be registered in your professional field, you will have to successfully complete a practical examination, subject to eligibility criteria (including practical experience).

Your employer has not approved study leave for your participation in the accreditation, as you are doing it in your own time.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Work-related expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are of a capital, private or domestic nature.

The Commissioner's view on the deductibility of self-education expenses is contained in Draft Taxation Ruling TR 2023/D1 Income tax: deductibility of self-education expenses. In accordance with Draft TR 2023/D1, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 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 (FC of T v. Finn (1961) 106 CLR 60;(1961 12 ATD 348) (Finn's Case); or

•         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 (FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 (Hatchett's Case).

Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses.

However, self-education expenses will not be deductible if the study is intended to:

•         enable you to get employment

•         enable you to obtain new employment, or

•         to open up a new income-earning activity (whether in business or in your current employment).

The decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 (Maddalena's Case). established that no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to get employment or to obtain new employment. The expenses would be incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist.

Application to your situation

We have taken the following into consideration when determining whether the expense is deductible:

•         You are currently employed in your professional field, however not in a registered capacity.

•         Your current role has some limitations in terms of duties and the performance taken into a project and you are unable to perform the same duties as a registered professional.

•         You hold relevant qualifications in your professional field overseas.

•         Your overseas qualifications are not automatically recognised in Australia.

•         Accredited in Australia will enable you to be registered in Australia.

Whilst we acknowledge that the knowledge gained from the course may have been of some assistance in your current occupation, the predominant focus of the course/accreditation is to provide the skills and qualifications to become registered in Australia within your professional field.

The cost of gaining those qualifications are more properly characterised as expenses incurred for the purpose of obtaining new employment or opening up a new income-earning activity. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing the taxpayer's assessable income.

Therefore, you will not be entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of having your overseas qualifications recognised in Australia.