Edited version of private advice

Authorisation Number: 1052341164883

Date of advice: 19 December 2024

Ruling

Subject: Self-education expenses

Question 1

Can you claim a deduction for the Juris Doctor tuition fees under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as self-education expenses?

Answer 1

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You arrived in Australia in 20XX on a student visa.

You plan to stay in Australia for several years. However, you may extend your stay after completing your degree as this will mean you become eligible for a number of visas.

You have several degrees.

You began studying your current degree recently.

You have provided a list of subjects you are studying. Undertaking the degree would mean that you are eligible to practise in a particular profession in Australia, after you have undertaken further education and training. However, that is not the career path you intend to follow.

You are employed by a government agency. You commenced your employment with the agency last year.

You are employed on a part-time basis increasing to full-time between university trimesters.

Following completion of the degree, you will continue to work in your current role. You are pursuing the degree to improve your bargaining position for higher pay when you renew your current employment contract.

You have provided a position summary.

Your employer has encouraged you to undertake the course and provides you with paid study leave in accordance with their policies. They have also provided you with a letter acknowledging that the degree you are undertaking directly relates to your employment.

In the income year ending 30 June 20XX, you have paid an amount in course fees. You will not receive any reimbursement for paying the fees.

You have further tuition fees to pay for the remainder of your course.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

You cannot claim a deduction for the XXX XXX tuition fees under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as self-education expenses.

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. Section 8-1 of the ITAA 1997 does not allow a deduction 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.

In accordance with TR 2024/3, expenses of self-education will satisfy the requirements of section 8-1 of the 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; 71 ATC 4184; (1971) 2ATR 557 (Hatchett's case)

Provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for 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 your current employment)

Paragraphs 13 to 16 of TR 2024/3 state:

13.          To be deductible under section 8-1 of the ITAA 1997, expenditure must be able to be characterised as having been incurred in gaining or producing assessable income.

14.          It is well established 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.

15.          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.

16.          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 19 of TR 2024/3 states that having the support or encouragement of your employer to undertake the self-education is not, by itself, determinative of whether the expense is deductible.

Under paragraph 22 of TR 2024/3, self-education expenses are incurred in gaining or producing your assessable income if either or both of the following apply:

•                     your income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables you to maintain or improve that skill or knowledge. (Principle 1 as outlined in Finn's case)

•                     the self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future. (Principle 2 as outlined in Hatchett's case)

Paragraph 43 of TR 2024/3 confirms that whether the self-education leads to, or is likely to lead to, an increase in your income from your current income-earning activities is a question of fact to be determined by all of the facts and circumstances of your particular case.

Paragraph 44 of TR 2024/3 confirms that an increase in salary or employment grade must form a real and substantial element in the combination of your motives for undertaking the self-education.

An example of self-education leading to an increase in income from current income earning activities would be where an employer provides a letter stating that the employee will receive an increase in salary on completion of a particular course of study.

Application to your circumstances

The Commissioner is not satisfied that your study of the current degree has the relevant connection to your income earning activities for it to be deductible under section 8-1 of the ITAA 1997.

The degree is a graduate entry degree. It is designed to help you develop the required skills and knowledge you will need to practice a particular profession in Australia.

In accordance with Principle 1 as outlined in Finn's case, there is only a general link between completing this course and your employment. Although the knowledge gained from undertaking the course may be beneficial, your employment is not based on the exercise of the skills and knowledge that you will attain from the course.

As the requirements for a deduction based on Principle 1 are not met, it is necessary to consider Principle 2 as outlined in Hatchett's case. This principle states that a deduction will be allowed where the self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future.

Although your employer has provided a letter stating that they support you undertaking the degree, they have not provided any guarantee or offer of an increase in income following completion of the course. Objectively, there are insufficient facts to show that the study will lead to an increase in income from your current income-earning activities. Therefore, a deduction is not allowed on the basis that the study will result in an increase in your income from your current income-earning capacities.

As the requirements for a deduction have not been met, you are unable to claim a deduction for the fees incurred for your study of the degree.