Edited version of private advice

Authorisation Number: 1052274564433

Date of advice: 3 September 2024

Ruling

Subject: Self education expenses

Question

Are you entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for tuition fees incurred in undertaking a post graduate course in the 20XX to 20XX income years?

Answer

No.

This ruling applies for the following periods:

Year ended DD MM YY

Year ended DD MM YY

Year ended DD MM YY

Year ended DD MM YY

The scheme commenced on:

DD MM YY

Relevant facts and circumstances

From DD MM YY, you were employed in the specified field.

Your role and duties

Your role involved investigating and being responsible for the team outputs.

Developing plans and effective resources allocation to achieve business area outputs.

Ensuring outputs are within the strategic direction of the employer.

Developing team members by guiding, mentoring, and working in an advisory capacity.

Assessing available information or evidence and determining appropriate law enforcement responses.

Undertake a range of tasks including collection, preparation, and presentation of facts to assist the process.

Liaising with agencies to assist in the effective investigation and successful resolution of matters.

Maintain law and investigation processes through ongoing professional development and learning opportunities outside the formal education process.

Promoting and maintaining knowledge and understanding of the system, components of offences and the social impacts of policing.

You were diagnosed with a workplace injury, it was medically determined that you would be unable to work in your current role and you stopped working for the employer.

You submitted a claim with the relevant agency and after several months and the investigation, they accepted your workplace injury claim. This was backdated to when you first sought medical treatment on DD MM YY.

From DD MM YY, you received worker's compensation incapacity payments at the rate of XX% of your normal weekly earnings (the payments). The payments are based on your normal weekly earnings in your previous role as this related to your workplace injury.

The payments are entirely for the loss of earnings, there is no payment for pain and suffering. You are required to provide evidence certifying your continued incapacity, as a condition of receipt of the payments.

On DD MM YY, you resigned from your role.

On DD MM YY, you started a new full-time role as a Director in the Investigations area.

Whilst you were working for your new employer, they paid your weekly employment income. The employment income was then reimbursed monthly by the payments.

Your new role and duties

Your role involved the investigation, interpreting and applying relevant legislation and policies, and management of regulatory and legislative obligations.

Your duties included the preparation of investigation reports as well as collection of evidence.

On DD MM YY, you medically retired from your new employment. As a result of the separation of employment any entitlement to the payments after separation are made through the payments payroll system directly to you, subject to you supplying current evidence.

Post Graduate Juris Doctor course

In MM YY, you enrolled in a post graduate Juris Doctor (the course) at the University.

You are not required to undertake the course to maintain your statutory entitlement for the payments.

On DD MM YY, you commenced the course with the completion date of MM YY.

You are in receipt of loan to assist you in paying the tuition fees. You are not receiving and not eligible for any government payments or scholarships.

In the YY and YY income years, you were enrolled in the following subjects, which you paid for on the census date and have completed:

Table 1: In the YY and YY income years, you were enrolled in the following subjects, which you paid for on the census date and have completed:

A brochure for the course has been provided and outlined the following descriptions of these subjects:

Legal Methods and Skills -

•         The unit enhances students' skills as budding legal practitioners.

•         It covers how to find the law, including its various sources, legal problem solving, statutory interpretation, advocacy, the arguing of law, and writing legal materials.

Torts Law -

•         The legal avenues available to people who have been harmed personally or whose land or goods have been interfered with is the domain of Tort law.

•         Tort law allows recovery for wrongs done. The unit introduces the concept of breach of rights as actionable in the courts and for which recovery is available apart from other harms.

•         It provides an understanding of the wide scope of law in addressing the intentional and unintentional harms, defences, and remedies.

•         The unit has a focus on negligence, but also introduces the torts of trespass, defamation, and nuisance.

Legal Systems -

•         This unit examines law as a system, with relevance to Australia.

•         It covers the concept of law itself; the common law, tradition, the Australian Constitution, other sources of law, the reception of English law in Australia, including the ramifications of this for First Nations Australians then and now, the practice of law, and critical perspectives on the law.

Constitutional Law -

•         This unit examines the operation of Australian constitutional law in its social and political context, particularly the Commonwealth Constitution.

•         Gaining familiarity with the composition of parliament and the relationships between the executive, legislature, and the judiciary.

•         Legal Methods and Skills, Legal systems, and Torts Law.

You are enrolled in and have not yet paid for the following subjects which have not been completed:

Contentions

Your reason for undertaking the course, is a form of rehabilitation, with the aim to returning to work and maintaining and improving your activities for daily living. This will enable you to initially commence employment in a part-time role and eventually, later, to commence employment in a full-time role. This course will increase your weekly income even if you only return 1- 2 hours per week. You will return when your medical condition permits.

Even though you have ceased working from your second role, the course would have further developed your skills in investigation of conduct, collection of evidence and preparation of reports. Interpreting and applying relevant legislation and policies, and management of regulatory and legislative obligations by the relevant government agencies.

You may return to work in a part-time in your second role, your previous supervisor was supportive of this. However, you are not limited to only returning to your previous role. Once you obtain formal qualifications, you contend that you will obtain self-employment or other employment in the relevant sectors.

Workers Compensation payments

Your payments are now linked to the annual wage price increase as per the relevant legislation and policies.

Prior to your separation from your second role your salary was linked to your previous roles and you would receive any Enterprise Agreement pay rises they provided. However, once you separated employment from your second role, your payment is now based on the annual wage price increase published each year.

From DD MM YY, your normal weekly earnings are calculated on this basis and are no longer tied to your former salary.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Issue

Self-education expenses

Question

Are you entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for tuition fees incurred in undertaking a post graduate Juris Doctor course?

Answer

No.

Summary

You are not entitled to claim a deduction under section 8-1 of theITAA 1997 for tuition fees incurred in undertaking a post graduate Juris Doctor course. There is an insufficient connection between the course, the income you earnt from your employer and your worker's compensation payments. Similarly, there is an insufficient connection between the subject units you have paid for, the income you earnt from your employer and your worker's compensation payments. The connection is too general and the expenditure on tuition fees is also incurred at a point too soon.

Detailed reasoning

Section 8-1 of the ITAA 1997

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for 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.

It is well understood that the words 'in gaining or producing assessable income' are to be understood to mean 'in the course of' gaining or producing assessable income and do not convey the meaning of outgoings incurred 'in connection with' or 'for the purpose' of deriving assessable income (Commissioner of Taxation v Payne [2001] HCA 3 (Payne)). 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.

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 (Payne and Ting and Commissioner of Taxation [2015] AATA 166 (Ting)). The expenditure must have a close connection to the performance of the duties and activities through which you earn income.

Taxation Ruling TR 2024/3

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

As stated in paragraph 23 of TR 2024/3, no deduction is allowable for self-education expenses if the study 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. They are incurred in getting, not in doing, the work which produces the income (see Federal Commissioner of Taxation v Maddelena (1971) 2 ATR 541 (Maddelena) and Ting).

The issues

You are studying a Juris Doctor degree. You seek deductions under section 8-1 of the ITAA 1997 for expenses incurred whilst undertaking the course, in its entirety, during the income years ending DD MM YY to DD MM YY.

In the alternative, you seek deductions under section 8-1 of the ITAA 1997 for expenses incurred whilst undertaking the individual subjects you have paid for and completed, being Legal Methods and Skills, Torts Law and Legal Systems during the income year ending DD MM YY and Constitutional Law during the income year ending DD MM YY.

Both issues involve a consideration of whether there is a close connection between the expenses incurred and the performance of your activities and duties through your income earning activities.

When a self-education expense is incurred

To be able to claim a deduction, the expenses must relate to your income earning activities at the time of incurring the expense (paragraph 72 of TR 2024/3).

You incur an outgoing at the time you owe a present money debt that you cannot escape (see Taxation Ruling TR 97/7 Income tax: section 8-1 -meaning of 'incurred' - timing of deductions).

Course fees to attend a university or approved higher education provider are deductible only where you are enrolled in a full fee-paying place. A full fee-paying student using a FEE-HELP loan may be able to claim a deduction for the course fees (where they are deductible) at the time they pay those fees using the borrowed money. Here, you advise that the course fees were paid using your FEE-HELP loan on the census date. This means you incurred the course fees for the completed subjects on the specified dates.

You have not yet incurred the course fees for the uncompleted subjects, Contract Law and Criminal Law and Procedure, as you have not yet paid the course fees for these subjects.

Your income earning activity

Up until DD MM YY, of the income year ending DD MM YY, you were employed on a full-time basis as the Director in the investigations area. Your employer paid your weekly employment income which was reimbursed monthly by your worker's compensation payment. You medically retired from your employer on DD MM YY, at which time your income earning activity with your employer ceased.

Following the separation of your employment, you received worker's compensation payments directly, subject to you supplying current medical evidence.

During the income years ending DD MM YY and DD MM YY, you also will receive worker's compensation payments directly, subject to you supplying current evidence.

Application to your circumstances

Entire course

In determining whether a deduction is allowable for the course expenses, there needs to be a close connection between the expenses incurred and the performance of your activities and duties through your income earning activities.

From an examination of the entire course, you only incurred expenses in respect of 2 subjects, Legal Methods and Skills and Legal Systems, whilst you were engaged in your income earning activities with your previous employer. The remaining self-education expenses incurred (or yet to be incurred) by you in studying the course were not incurred in the course of gaining or producing your assessable income as they were not required to maintain your statutory entitlement to workers compensation payments.

The course of study is too general for there to be a direct enough or close connection between your course expenses and the gaining or producing of your assessable income under section 8-1 of the ITAA 1997. You were employed for your ability to provide certain duties to the Department. We do not consider that a close connection between the course and the income earing-activities exists as the studies were not incurred in the process of carrying out your duties, nor was there a specific requirement from your employment duties for the course to be completed. Any perceived relevance to the performance of duties is not enough (Ting). Similarly, the course of study is too general for there to be a close connection between your course fees and your worker's compensation payments.

In addition, you contend that the reason for undertaking the course is a form of rehabilitation, with your aim to be returning to work and maintaining your activities for daily living. This will enable you to initially commence employment in a part-time role and eventually, later, to commence employment in a full-time role.

As noted above, you cannot deduct self-education expenses if the education is undertaken or designed to enable you to get employment; obtain new employment (Maddelena); or open up a new income-earning activity, whether in business of in your current employment (NT91/37 and Commissioner of Taxation [1991] AATA 290). Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income and as such, the course expenses will not be deductible under section 8-1 of the ITAA 1997 (paragraphs 53 and 54 of TR 24/2023). They are incurred in getting, not in doing, the work which produces the income.

Individual subjects

In determining whether a deduction is allowable for the expenses of individual subjects, there needs to be a close connection between the expense incurred and the performance of your activities and duties through your income earning activities.

You have incurred expenses in paying for 4 subjects. Each subject will be considered individually.

Legal Methods and Skills

You incur the expense for this subject whilst you were employed. It is therefore appropriate to consider your duties with your previous employer and whether there is a close connection between the subject expense and your employment. Completion of this subject was not required as a condition of your employment, nor was it required in order to fulfil your tasks and duties with your employer.

You have provided a statement of your role and duties with duties with your previous employer. Whilst the self-education may result in a general improvement to your skills and knowledge, that is not enough to establish a close connection with the gaining or producing of your assessable income. Any perceived relevance to the performance of duties is not enough (Ting). It is considered that the subject is too general for there to be a sufficient connection between the self-education expense and your previous employer and no deduction under section 8-1 of the ITAA 1997 will be available to you.

Legal Systems

You incur the expense for this subject whilst you were employed. We consider that the reasoning provided above for the Legal Methods and Skills subject also applies to this subject. It is considered that the subject is too general for there to be a sufficient connection between the self-education expense and your previous role and no deduction under section 8-1 of the ITAA 1997 will be available to you.

Torts Law

You incur the expense for this subject following your separation of employment. At the time of incurring the expense you were in receipt of worker's compensation payments, subject to you supplying evidence. Completion of this subject was not required as a condition of receipt of your worker's compensation payments. As such, the subject is too general for there to be a close connection between your subject expense and your worker's compensation payments.

Further, the subject expense is incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income. The subject expense will not be deductible under section 8-1 of the ITAA 1997 as it is incurred in getting, not in doing, the work which produces the income.

Constitutional Law

You incur the expense for this subject following your separation of employment. We consider that the reasoning provided for the Torts Law subject also applies to this subject. The subject is too general for there to be a close connection between your subject expenses and your worker's compensation payments. The subject expense will not be deductible under section 8-1 of the ITAA 1997 as it is incurred in getting, not in doing, the work which produces the income.