Edited version of private advice

Authorisation Number: 1052300575780

Date of advice: 3 September 2024

Ruling

Subject: Deductions - course fees

Question

Will the course fees for the course be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed on a casual basis.

In 20XX, you commenced a course of study.

Fee-HELP was used.

Your employer has not encouraged you to undertake the course by providing any study leave, allowance, reward, bonus, or reimbursement of study expenses.

Your employer has a room at their premises which you will utilise, once graduated, to provide additional services at higher rates.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You cannot claim your self-education expenses as the attainment of the qualification will enable you to obtain new employment or to open up a new income-earning activity (whether in business or in your current employment).

Detailed reasoning

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

Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's income earning activities at the time the study is undertaken.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual, considers the deductibility of self-education expenses and states that 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, the self-education expenses are allowable as a deduction.

In addition, if 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 his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction.

However, no deduction is allowable for self-education expenses if the study will enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment). This includes studies relating to a particular profession, occupation, or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

In the case of Assefa v. FC of T [2009] AATA 2 (Assefa's case), it was considered whether studying a course of education in order to advance to a higher classification of nursing was opening up a new income earning activity. The taxpayer in this case was employed as an assistant in nursing and a care service employee while studying a Bachelor of Nursing degree.

The Administrative Appeals Tribunal held in Assefa's case that no deduction was allowable for the self-education expenses. It was determined that there was a significant difference between the position of enrolled nurse and registered nurse on one hand, and personal care assistant/nursing assistant on the other. The taxpayer was not considered to be incurring the expenditure in gaining or producing her assessable income as a personal care assistant/nursing assistant but was studying towards their initial qualification as a registered nurse.

Application to your circumstances

Your case is similar to Assefa's case in that although the knowledge gained from completing the course may be of some assistance to you in your current employment duties; the course is designed to enable the student to, once graduated, be able to commence a new income earning activity. Furthermore, the subjects studied will provide you with skills and abilities far in advance of those that are required in your current employment duties.

Although the additional services you will provide once you are qualified, will be with the same employer and you will still undertake your current duties, the additional services are considered to constitute a new income earning activity that is different to your current employment duties.

Therefore, it is considered that the study does not have the required connection to your current income-earning activity consistent with those views expressed in Assefa's case. The knowledge, skills, and abilities you will have gained from completion of the course will assist you in opening up a new income earning activity and therefore they have been incurred at a point too soon.

Accordingly, you are not entitled to a deduction for self-education expenses incurred, under section 8-1 of the ITAA 1997.