Edited version of your private Advice

Authorisation Number: 1052289394043

Date of advice: 29 August 2024

Ruling

Subject: Self-education expenses

Question 1

Are your self-education expenses detailed in Group X, incurred in studying a Diploma of Financial Counselling, an allowable deduction 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 Y, incurred in studying a Diploma of Financial Counselling, an allowable deduction 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

The scheme commenced on:

XX YYYY 20YY

Relevant facts and circumstances

You currently work at a regulator.

You provided a summary of the duties performed in your current role (as outlined in your job description).

You commenced a Diploma of Financial Counselling (Diploma).

The Diploma is a nationally recognised qualification that assists students gain the knowledge and skills required to work as a financial counsellor in Australia.

You will be paying in full fee. You will not defer these fees through the Higher Education Loan Program.

You provided a subject outline and an explanation was also provided of how each subject is connected to your income earning activities.

After having a discussion with your manager, your manager encouraged you to do the Diploma for your professional development and to have more of a chance of gaining a promotion.

You have been approved for leave by your employer for the Diploma.

You will not be reimbursed or receive an allowance by anyone for expenses incurred in relation to your study.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

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 (TR 2024/3) 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. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

The Diploma of Financial Counselling can be described as a course of study that focuses on assisting people to gain knowledge and skills required to work as a financial counsellor in Australia. We consider that you are not entitled to a deduction for your all of your self-education expenses incurred in undertaking the Diploma as there are several units of study that do not have the necessary connection against your income-earning activity.

Instead, we have considered the connection that each individual unit of study within the Diploma has to your current income earning activities. We have also provided our view below on the units they are not sufficiently connected to your income earning activities.

Our view:

We are not satisfied that the knowledge imparted by most units you have undertaken will have a sufficient connection to your current income earning activities.

Although the units of study may have an ancillary purpose of developing 'soft skills' it is our view that that they only have an indirect or casual link to your employment duties, and the learning is focussed on areas outside of your purview.

Based upon the subject descriptions, these units of study focus specifically on the functions of a financial counsellor and debt discussions. In contrast, your employment responsibilities are not related to the functions of a financial counsellor. While you may raise debt in your position, it is not an expectation that you would provide debt discussions with clients like it would be if you worked in other areas at your employer.

You are therefore not entitled to a deduction for these units.

For other units, you have not provided an explanation of their relevance to your income earning activities.