Self Education Expenses

Where your income earning activities are based on the exercise of a skill or having specific knowledge, self education expenses incurred to maintain or improve that knowledge or your ability to exercise those skills are deductible.

Whether the self education enables you to maintain or improve a skill or specific knowledge is a question of fact to be determined by all the facts and circumstances of your particular case.

Courts and tribunals have found the following when considering whether self education expenses were incurred to maintain or improve knowledge or skills:

• If the self education is too general in terms of your current income earning activities, the necessary connection between the self education expense and the income earning activity does not exist. This is often the outcome for the cost of self improvement or personal development courses because the knowledge and skills obtained is too general.
• Self education that results in you being better equipped to perform your current income-earning activities is deductible where the self education has the requisite connection to your income-earning activities at the time.
• Obtaining a higher degree of qualification within your profession or industry is deductible where the self education has the requisite connection to your income earning activities at the time.
• Expenditure on an overseas study tour or trip has been found to be deductible in limited circumstances where the study tour or trip had the requisite connection to the income earning activities at the time. Notable factors to demonstrate such a connection are:
  – devoting all of your time while overseas to the advancement of your knowledge relevant to your work
  – the tour or trip is undertaken while you are employed in the relevant role
  – the tour or trip was not recreational or general in nature, but rather showed a particular special circumstance to differentiate it from mere recreational satisfaction
  – the tour or trip was requested or supported by your employer.

Where the self education objectively leads to, or is likely to lead to, an increase in your income from your current income earning activities, the self education expenses are deductible.

Examination is required to determine what it is that is productive of your assessable income and whether the self education leads to, or is likely to lead to, an increase in your income from your current income earning activities. This is a question of fact to be determined by all the facts and circumstances of your particular case.

The following factors have been identified by courts and tribunals as relevant when considering whether the self education leads to, or is likely to lead to, an increase in your income from your current income earning activities:

• The increase in income from your current income earning activities is clearly and proximately linked with the self education.
• There is a real opportunity for your promotion resulting from the self education.
• The self education leads to or is likely to lead to your promotion to a higher pay grade in your current income-earning activities.
• The self education leads to or is likely to lead to a bonus or move to a higher pay grade on completion of your self education, where you remain in your current role doing the same or very similar activities.
• The self education is something that leads to or is likely to lead to a promotion to a position which is not materially different from your current position.
• So far as overall motive or purpose is material in your circumstances, your advancement of employment grade and salary, must form a real and substantial element in the combination of your motives for undertaking the self education.

No one factor on its own will necessarily determine whether the self education leads to, or is likely to lead to, an increase in your income from your current income earning activities.

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.

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

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.

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.

To be deductible, the expenses must be relevant to your income earning activities at the time you incur the expense. A deduction is not available if, at the time you incur the expense, you are not undertaking income earning activities to derive assessable income, either by employment, carrying on a business or by other means.

If you cease your income earning activities part way through completing your deductible self education, only the expenses incurred while you were undertaking your income earning activities are deductible. This is because the connection with the self education is lost once you cease your income earning activities. For example, if you are made redundant and the self education is paid in instalments or per subject, only those incurred at the time you were employed are deductible you cannot claim a deduction for the entire course even where you commenced it prior to being unemployed.