Edited version of private advice

Authorisation Number: 1052225889667

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Date of advice: 27 February 2024

Ruling

Subject: Self-education expenses

Question

Are your course fees an allowable deduction?

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 enrolled in a course of education.

You commenced this course a number of years ago and completed it in a recent financial year.

You started working in the relevant field a couple of years ago.

While working there you were transferred to a specialised area within your employer organisation.

You have continued to work for your employer for the whole of the financial year.

You commenced a degree while employed in your current position.

You were given credit for some of the subjects of the degree that you studied as part of your course.

You commenced work as a registered professional several months ago.

You were given time off while working to study and you also took annual leave.

Your employer did not contribute to the costs of the course fees.

Relevant legislative provision

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 while 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 Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses. In accordance with TR 2024/3, 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 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.

In your case the fees for the degree are not deductable under section 8-1 of the ITAA 1997 as this degree was not required for you to perform your duties at that time.

The Commissioner acknowledges that the degree would have been useful in your employment, but it enabled you to open a new income earning activity once you graduated

The degree enabled you to obtain new work as a registered professional.

The degree was not studied in the course of obtaining your previous position, the degree enabled you to obtain work as a registered professional which is a new position.

Therefore, the fees are not an allowable deduction.