Edited version of private advice

Authorisation Number: 1052250346528

Date of advice: 20 May 2024

Ruling

Subject: Self-education expenses

Question 1

Are your self-education expenses, detailed in Group A, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 2

Are your self-education expenses, detailed in Group B, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the ITAA 1997?

Answer

No.

Question 3

Are your self-education expenses, detailed in Group C, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the ITAA 1997?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 February 20XX

Relevant facts and circumstances

On 20XX you commenced a Bachelor of XXXX course.

You were required to complete XX subjects. The subjects are grouped under Group A, Group B and Group C.

On 20XX you commenced permanent part-time employment in Role A with Organisation A.

Your employment contract confirms your role and responsibilities:

You continued to study whilst working in Role A.

The total course fee was $XX.

You completed XX subjects (listed under Group C) prior to gaining employment.

Whilst employed in Role A with Organisation A you completed XX subjects (listed under Group A and Group B).

You provided details of the individual subjects and how they relate to your Role A employment duties.

You paid for the course fees yourself. You were not reimbursed.

You did not receive any government allowance to study (including Abstudy, Austudy or Youth Allowance).

You did not receive a taxable bonded scholarship.

On 20XX you finished Role A with Organisation A.

On 20XX you completed the Bachelor of XXXX course.

On 20XX you commenced new employment in Role B with Organisation B.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Issue- Deductions - Self-Education Expenses

Question 1

Are your self-education expenses, detailed in Group A, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

Yes. You are entitled to claim a deduction for the Bachelor of XXXX fees you incur for the units of study in Group A. There is a sufficient connection between each unit of study and your Role A income earning activities.

Question 2

Are your self-education expenses, detailed in Group B, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the ITAA 1997?

Summary

No. You cannot claim a deduction for the course fees you incur for the units of study in Group B. There is an insufficient connection between these units of study and your Role A.The Group B subjects are considered too general in nature.

Question 3

Are your self-education expenses, detailed in Group C, incurred in studying a Bachelor of XXXX allowable deductions under section 8-1 of the ITAA 1997?

Summary

No. You cannot claim a deduction for the course fees you incur for the units of study in Group C. At the time you incurred the expenses, you were not undertaking income-earning activities to derive assessable income. These expenses are not connected to any income-earning activity at the time they were incurred.

Detailed reasoning

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 2024/3 Income tax: deductibility of self-education expenses incurred by an individual, discusses circumstances in which self-education expenses are allowable. 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).

This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce your assessable income, or if none is produced, would be expected to produce your assessable income (paragraph 15 of TR 2024/3).

It is not enough to show only that there is some perceived connection, general link or causal connection between the expenditure and the production of your income. The expenditure must have a close connection to the performance of the duties and activities through which you earn your income (paragraph 16 of TR 2024/3).

Paragraph 23 of TR 2024/3 states:

23. Self-education expenses are not incurred in gaining or producing your assessable income if either of the following apply:

•         The self-education will enable you to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in your current employment). This includes studies relating to a particular profession, occupation or field of employment in which you are not yet engaged. These expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income.

•         You are not undertaking income-earning activities to derive assessable income at the time you incurred the expenses. These expenses are not connected to any income-earning activity at the time they are incurred.

Application to your circumstances

To determine whether circumstances exist that support your self-education deductions, it is necessary to determine whether there is a sufficient connection between you incurring your course fees and your current income earning activities (Role A). Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

Whilst employed in Role A with Organisation A you completed XX subjects. These subjects are listed in Group A and Group B.

Group A subjects:

After analysing each subject outline against the role and considering your explanation of how the subjects maintained or improved a skill or knowledge specific to the Role A work activities, we have concluded the Group A subjects have the relevant connection to your relevant income earning activities.

Therefore, you are entitled to claim a deduction for the self-education expenses for the Group A subjects under section 8-1 of the ITAA 1997.

Group B subjects:

The remaining subjects you completed whilst performing Role A are considered too general in nature. We acknowledge there may be some minor connection, but the specific skills and knowledge gained from the remaining subjects lack the substantive connection to your income producing activities. The high-level knowledge and skills acquired from the Group B subjects are well beyond your requirements for your role. There is an insufficient connection between these units of study and your Role A.

The self-education expenses related to the Group B subjects are not allowable deductions under section 8-1 of the ITAA 1997.

Group C subjects:

At the time you incurred the self-education expenses, you were not undertaking income-earning activities to obtain assessable income. These expenses are not connected to any income-earning activity at the time they were incurred and you were not yet engaged in a relevant field of employment.

You cannot claim a deduction for the course fees you incur for the units of study in Group C.