Edited version of your written advice

Authorisation Number: 4130052257623

Date of advice: 11 October 2018

Ruling

Subject: Self education expenses

Question 1

Are you entitled to claim a deduction for your self-education expenses of incurred in the 20XX-20XX, 20XX-20XX and 20XX-20XX income years?

Answer

No.

Question 2

Are you entitled to claim a deduction for your self-education expenses incurred in studying for a Masters course?

Answer

No.

Question 3

Are you entitled to claim a deduction for self-education expenses incurred in studying for a Graduate degree?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts

You are a holder of a student visa.

You initially studied General English Programs. You commenced your Masters studies in 20XX. You completed your Masters studies in 20XX.

You started work in Australia in 20XX, in a casual job. You then found a professional job.

You commenced work with your current employer in late 20XX, and this position later became permanent.

You commenced your Graduate degree in the 20XX-20XX income year.

You needed to study to be more professional in your job, and to be eligible for a permanent visa to remain in Australia.

Your employer is unable to assist with fees for your studies.

You are good at your job and you know you can improve your knowledge and experience in the future.

Your employer has provided documentation indicating that your studies relate to your current income producing activities and will help to maintain or improve your skills.

You have paid study fees in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 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 98/9 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.

Similarly, 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, a deduction is allowable.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, & 48 62 of TR 98/9).

Studies undertaken in order to obtain employment in a new field are considered to have been incurred at a point too soon to be regarded as incurred in gaining or producing assessable income and such expenses are not deductible.

Paragraph 42 of TR 98/9 states:

If a course of study is too general in terms of the taxpayer's current income earning activities, the necessary connection between the self-education expense and the income earning activity does not exist. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances.

The Commissioner also considers that if short term or casual employment is gained after the commencement of a course of education, expenses in relation to the course will not be deductible, even if the employment does have some connection with the course of self-education. In such circumstances, it is considered that the requisite connection between the expenditure and the assessable income is absent, as the expenses of self-education are incurred to gain a qualification. The self- education is not being undertaken to maintain or improve a taxpayer’s employment skills.

In your case you came to Australia on a student visa and studied General English and then your Master’s course. You needed to study to apply for a permanent visa.

The English programs are considered to be general in nature and are not sufficiently related to your employment. Therefore no deduction is allowed for these programs.

The essential character of your Master’s fees and self-education expenses is to enable you to complete your studies and open up paths to get better work in your chosen field and to remain in Australia. The expenses are incurred at a point too soon to be regarded as being incurred in gaining or producing your assessable income and are therefore not an allowable deduction. The fact you obtained employment in a related industry to that of your Masters study is not considered decisive.

You commenced your Graduate studies after the start of your current full time employment position. It is considered that the expense for this course is sufficiently connected to your current employment and the associated expenses are an allowable deduction.