Edited version of private advice

Authorisation Number: 1052378047895

Date of advice: 26 March 2025

Ruling

Subject: Deductions - self-education

Question 1

Can you claim a deduction for self-education expenses in relation to course fees (either partially or in full) for the course under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Can you claim a deduction for self-education expenses in relation to airfares to and from Country A under section 8-1 of the ITAA 1997?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

On XX XXXX 20XX, you commenced employment as a hospitality attendant with employer A on a part time basis.

Working for employer A, you are responsible for the delivery all front of house services. Your role to lead, coach, motivate and develop on train guest service attendants, to ensure that employer A delivers the overall experience. The role is the main point of contact for guests and will personally ensure special requests are accommodated and service issues and address are dealt with accordingly.

For employer A, your hospitality attendant duties include:

•                     Delivering high quality service and providing exceptional guest experiences on and off the XXXX.

•                     Ala carte restaurant service

•                     Bar and lounge service including table service.

•                     Housekeeping on-XXXX

•                     Luggage handling

•                     Concierge services at each arriving and departing XXXX.

•                     Act as a host for guests on off-XXXX excursions.

You work approximately minimum XX hours for employer A per fortnight.

In XXXX 20XX, you commenced employment as a waitress and events manager with employer B on a casual basis.

Working for employer B, you are responsible for ensuring exceptional service and a seamless dining experience during XXXX events. The role requires a combination of excellent customer service skills, organisational abilities, and effective communication to manage both front of house operations and event coordination.

For employer B, your management duties include:

•                     Serve as the main point of contact for clients on the day of the event, ensuring their needs are met promptly and professionally.

•                     Oversee the setup and breakdown of event spaces, ensuring all areas are clean, organised, and ready for service.

•                     Manage and coordinate event staff, providing guidance and support to ensure efficient service delivery and teamwork throughout the event.

For employer B, your waitressing duties include:

•                     Provide exceptional customer service to guests during events, ensuring a positive dining experience.

•                     Deliver food and beverages accurately and efficiently, addressing any special dietary requirements or preferences.

•                     Serve food and beverages in a timely manner, adhering to presentation and quality standards.

•                     Monitor guests' needs throughout the event, refilling drinks, clearing plates, and addressing any issues that arise.

•                     Maintain a clean and organised workspace during service, ensuring health and safety standards are followed.

For employer B you are also required to communicate effectively with kitchen staff regarding menu items, dietary restrictions, and special requests.

You work approximately 6 to 15 hours for employer B per fortnight.

On XX XXXX 20XX, you paid a non-refundable amount of $XX to apply for the course.

The course offers young professionals a X-month course across X countries that results in a joint award from institution A and institution B.

The institution A course offers the following pastry skills:

•                     Getting organised.

-                    read and interpret a worksheet

-                    determine the products and materials necessary for the tasks to be carried out

-                    schedule the tasks to be completed in a certain time

-                    organise your professional workstation.

-                    take the necessary steps for established production

-                    calculate production requirements

-                    Implement preliminary preparations.

-                    Prepare doughs, batters and creams.

-                    Learn and practice simple baking methods.

-                    Analyse, package and plate productions

The institution B course offers the following pastry skills:

•                     Prepare traditional and modern doughs, batters and creams.

•                     Learn and practice fermentation methods.

•                     Prepare gelato, granita and sorbets.

•                     Display and plate productions.

•                     Italian food and culture and interpretation.

Both institution A and institution B provide the practical skills in preparing food.

On XX XXXX 20XX, you accepted an offer to complete the course.

On XX XXXX 20XX, you paid $XX for the prepayment of tuition fees and other costs to confirm enrolment.

On XX XXXX 20XX, you paid $XX for the return flights.

On XX XXXX 20XX, you paid $XX towards your tuition fees.

For the period of the course, you took approved leave from employer A to complete the course. Your leave comprised of paid and unpaid leave.

On XX XXXX 20XX, you made the final payment of $XX towards your tuition fees.

The total cost of the course was $XX.

On XX XXXX 20XX, you completed your last shift with employer B. You did not formally quit the company, however, as with the nature of casual work, the employment relationship has no firm advance commitment to ongoing work.

On XX XXXX 20XX, you travelled to Country A alone.

From XX XXXX 20XX to XX XXXX 20XX, you completed the intuition A course.

On XX XXXX 20XX, you transferred from institution A to institution B.

From XX XXXX 20XX to XX XXXX 20XX, you completed the institution B course.

On XX XXXX 20XX, employer B reached out to see if you were interested in further work.

From XX XXXX 20XX to XX XXXX 20XX, you took this time to privately travel while overseas.

On XX XXXX 20XX, you travelled back to Australia.

When returning to work for employer A, you started a new role as a XXX XXX manager. Your manager duties include:

•                     Manage all aspects of all on XXXX front of house service delivery throughout the restaurant, lounge and bar, ensuring the quality of the guest experiences through proactively monitoring net promotor scores (NPS) for each journey.

•                     Ensure guests receive a warm welcome each time they enter the restaurant and lounge, ensuring staff address guests by name.

•                     Manage all guest feedback and issues as a first point of contact. Assist in the coordination of rectifying and guest service issue.

•                     Manage hospitality attendant's workflow and hours ensuring that hours are under budget for that journey, reporting any variances and working with the journey manager to actively problem solving to reduce impact.

•                     Lead, mentor and support hospitality attendants. Conducting regular performance conversations. Providing timely feedback and training to staff, resolving conflicts between staff when it arises.

•                     Conduct pre-service briefings with the team including chefs to understand the menu, dietary, VIPs and set the tone for service time.

•                     Ensure staff complete stocktakes as required, to ensure PAR levels are maintained.

•                     Oversee VIP guests within section, making sure they are greeted and provided an experience while on-board.

•                     Manage exclusion selections and numbers for guests, assisting with coordinating and working of exclusions and experiences, including concierge services at terminals.

•                     Carry out crew uniform, grooming and train presentation checks throughout journey. Ensuring high standards of service delivery in line with company policies and procedures.

•                     Review and approve clocking times of hospitality attendants in the time management system.

•                     Drive the safety culture on XXXX, ensuring all incidents and hazards are reported and investigated in a timely manner. Escalating reporting where appropriate.

•                     Actively participate in the continuous improvement program, working on and off XXXX to lead and support projects.

•                     Disseminate all relevant information and communication to crew through toolbox talks and written instruction as required.

On XX XXXX 20XX, you recommenced employment with employer B.

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.

The High Court majority in Commissioner of Taxation v Payne [2001] HCA 3 said it is well established that these words are to be understood as meaning incurred '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.

The majority further stated that the meaning of 'in the course of' gaining or producing income was amplified in Ronpibon Tin NL v Commissioner of Taxation (Cth) [1949] HCA 15 where it was held that:

... to come within the initial part of [section 8-1] it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income, or if none be produced, would be expected to produce assessable income...

Taxation Ruling TR 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 sets out when an employee can deduct a work expense under section 8-1 of the ITAA 1997. For the purposes of this Ruling, 'work expense' means 'a loss or outgoing you incur in producing your salary or wages'.

For the expense to be deductible it must be in gaining or producing assessable income. Paragraphs 16, 22, 23 and 25 of the TR 2020/1 state:

16. For expenses incurred by employees, the fundamental question is whether an expense is incurred in the course of earning employment income. This involves considering the proper scope of the particular taxpayer's work activities to determine if the circumstances of the expense have a sufficiently close connection to earning the employment income.

22. The requirement that expenses be incurred in the course of producing assessable income means that it is not enough to show only that there is some general link or causal connection between expenditure and the production of income. The expenditure must have a sufficiently close connection to performance of the employment duties and activities through which the employee earns income.

23. Accordingly, in some cases, expenditure would be regarded as too remote from the income-earning activities or incurred only as a prerequisite to earning income, and not incurred in the course of producing that income.

25. Other examples of expenditure that would be too remote from the income-earning activity, or incurred at a point too soon to be characterised as incurred in the course of earning assessable income, would be expenses of looking for and securing new employment. This would also be the case for relocation expenses to work in a different city or state. Similarly, education expenses to obtain qualifications for new employment would not be incurred in the course of gaining or producing relevant assessable income.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual discusses the circumstances under which self-education expenses are allowable as a deduction. 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).

Paragraphs 13 to 16, 18 and 19 of the TR 2024/3 state:

13. To be deductible under section 8-1, 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.

18. The reason or motive for undertaking the self-education is not determinative of whether the expense is incurred in gaining or producing your assessable income:

In many, if not most, cases the objective relationship between an expenditure and that which is productive of income will provide a sufficient answer to the inquiry posed by [section 8-1].

19. Having the support or encouragement of your employer to undertake the self-education also is not, by itself, determinative of whether the expense is deductible.

Under paragraph 22, 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)

•                     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)

Paragraph 23 lists exclusions where 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. (Exclusion 1)

•                     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. (Exclusion 2).

Exclusion 1 is expanded upon in paragraphs 53 through to 56 of the TR 2024/3, where it states:

53. You cannot deduct self-education expenses if the education is undertaken or designed to enable you to:

•                     get employment

•                     obtain new employment, or

•                     open up a new income-earning activity, whether in business or in your current employment.

54. Such expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

55. What is considered new employment, or a new income-earning activity is a question of fact to be determined by all the facts and circumstances of your particular case.

56. The following have been identified by courts and tribunals as circumstances in which self-education expenses are incurred at a point too soon:

•                     The self-education is undertaken with an intention to obtain new employment based on evidence of arrangements (such as employment discussions) with a prospective employer.

•                     The self-education is designed to enable you to open up a new income-earning activity, whether in business or in your current employment.

•                     The self-education is towards an initial qualification which would not increase your ability to perform your current income-earning activities

Paragraphs 125, discusses the deductibility of airfares associated with self-education expenses and states:

125. Airfares incurred to participate in self-education, provided you are not living at the location of the self-education activity, are deductible. Airfares are part of the cost of undertaking the self-education activities.

Taxation Ruling TR 97/7 Income tax: section 8-1 - meaning of 'incurred' - timing of deductions provides the Commissioner's view on whether the word 'incurred', in section 8-1 of the ITAA 1997, has the same meaning for taxpayers who return their income on a receipts basis as it does for those taxpayers who generally return their income on an earnings basis.

TR 97/7 provides that to be eligible for a deduction under 8-1 of the ITAA 1997, a loss or outgoing must be incurred. Paragraph 6 states:

6. The courts have been reluctant to attempt an exhaustive definition of a term such as 'incurred'. The following propositions do not purport to do this, they help to outline the scope of the definition. The following general rules, settled by case law, assist in most cases in defining whether and when a loss or outgoing has been incurred:

a)            a taxpayer need not actually have paid any money to have incurred an outgoing provided the taxpayer is definitively committed in the year of income. Accordingly, a loss or outgoing may be incurred within section 8-1 even though it remains unpaid, provided the taxpayer is 'completely subjected' to the loss or outgoing. That is, subject to the principles set out below, it is not sufficient if the liability is merely contingent or no more than pending, threatened or expected, no matter how certain it is in the year of income that the loss or outgoing will be incurred in the future. It must be a presently existing liability to pay a pecuniary sum;

b)            a taxpayer may have a presently existing liability, even though the liability may be defeasible by others;

c)            a taxpayer may have a presently existing liability, even though the amount of the liability cannot be precisely ascertained, provided it is capable of reasonable estimation (based on probabilities);

d)            whether there is a presently existing liability is a legal question in each case, having regard to the circumstances under which the liability is claimed to arise;

e)            in the case of a payment made in the absence of a presently existing liability(where the money ceases to be the taxpayer's funds) the expense is incurred when the money is paid.

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 expenses, and your income earning activities at the time of commencing the courses. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

Due to you not being 'completely subjected' to the loss or outgoing until they were paid, the expenses are incurred at the time they were paid.

Question 1

The Commissioner is not satisfied that your study of the course has the relevant connection to your income earning activities for it to be deductible under section 8-1 of the ITAA 1997. There is only a general link between completing this course and your employment. Your role with employer A and employer B involved management responsibilities and front of house services, whereas the course is designed to increase your capability in culinary cooking practices. Your employment lacks the nexus with the educational course.

You have stated that completing the course will allow you to better provide culinary assistance to your professional chefs during food preparation and plating for events. You have also stated that the technical knowledge from the course would allow you to anticipate the chefs needs and execute tasks the chefs need assistance with, which would improve their operational efficiency. There is a relevant connection of the course to the duties of a chef but not in your role supporting the chef. The course opens new income earning opportunities to you, if you decide to work in the kitchen within culinary practice. At the time of incurring these expenses, they are at a point too soon.

Therefore, you are also not entitled to claim any portion of the expenses you incurred for the course fees under section 8-1 of the ITAA 1997.

Question 2

Airfares are deductible when the expense is incurred to participate in a course of self-education which is related to your income producing activities. We have determined in question 1 that you are not entitled a deduction for the course fees. Therefore, you are also not entitled to claim any portion of the expenses you incurred for airfares travelling to and from the location of the course under section 8-1 of the ITAA 1997.