You can claim a deduction for a self-education expense if, at the time you incur the expense, it has a sufficient connection to earning income from your employment activities, either:

• maintains or improves the specific skills or knowledge you require for your current employment activities
• results in, or is likely to result in, an increase in your income from your current employment activities.

Your employment activities are the duties and tasks expected of you to perform your job and are usually set out in your duty statement.

You may also be eligible if you undertake a course to maintain your right to receive a taxable bonded scholarship. In some circumstances, only the expenses incurred for certain subjects or components of your self-education will have a sufficient connection to earning your employment income.

ATO Example: course related to apprenticeship

Isaiah is employed as an apprentice hairdresser. As part of his apprenticeship, Isaiah is required to work 4 days a week at his employer’s salon receiving on-the-job training, and one day a week at TAFE doing a Certificate III in Hairdressing.

Isaiah’s employer pays for his course fees and textbooks. Isaiah pays for public transport to and from TAFE on his training day and stationery.

The course will improve the knowledge and skills that Isaiah requires to carry out his employment activities. Isaiah can claim a deduction for the self-education expenses he incurs (transport and stationery expenses).

Isaiah can’t claim a deduction for the course fees or textbooks because he doesn’t incur those expenses, his employer does.

ATO Example 2: course maintains and improves skills and knowledge

Bevan has a Diploma in Nursing and is employed at a hospital as an enrolled nurse. He is currently undertaking a Bachelor of Nursing to become a registered nurse.

Enrolled nurses are supervised by registered nurses, but both are nurses. The skills and knowledge required by Bevan to perform his duties as an enrolled nurse will be maintained and improved by undertaking a Bachelor of Nursing.

There is also a strong likelihood that Bevan’s income as a nurse will increase as a result of completing his Bachelor of Nursing.

Bevan can claim a deduction for the expenses he incurs to complete the course.

If Bevan was employed as a personal care worker rather than an enrolled nurse, he wouldn’t be entitled to claim a deduction for his self-education expenses. A personal care worker assists patients with everyday tasks such as showering, dressing and eating. The skills and knowledge required to carry out those duties are not the same as the skills and knowledge required to carry out a nurse’s duties. The expenses would be incurred to enable Bevan to get new employment as a nurse (for more information on expenses incurred to get new employment see When you can’t claim a deduction).

Example 3: course leading to increased income

Ranita is one of several systems administrators employed by a large company. Ranita’s employer pays systems administrators more if they know how to use a particular programming language.

Ranita enrols and pays for a course on how to use the programming language. On completion, Ranita’s employer gives her a pay rise.

Ranita can claim a deduction for the self-education expenses she incurs because the course results in an increase in income from her current employment activities.

When you can’t claim a deduction

You can’t claim a deduction for a self-education expense if, at the time you incur the expense:

• it doesn’t have a sufficient connection to your employment activities
• you are not employed
• it only relates in a general way to your employment activities – such as undertaking a full-time fashion photography course and working as a casual sales assistant on the weekends
• it enables you to get new employment or change employment – such as a nurse completing a Medical degree to become a doctor or a café worker studying Hotel and Hospitality management.

ATO Example 4: course enables you to get new employment

Wendy is employed as a teacher’s aide at a primary school. She is currently undertaking a Bachelor of Education. Wendy works with a primary school teacher to complete non-teaching duties.

While Wendy works with teachers when she is carrying out her duties, becoming a teacher would significantly change her work activities. There isn’t a sufficient connection between the course and Wendy’s current duties. Completing a Bachelor of Education will allow Wendy to obtain new employment as a teacher.

Wendy can’t claim a deduction for the expenses she incurs to complete her Bachelor of Education.

ATO Example 5: not sufficiently connected to employment

Louis is a computer science student who works at the university laboratory installing computers. The course and the job are generally related, and what Louis learns might help him in his job.

However, the high-level professional skills Louis acquires from his studies are well beyond the skills he requires for his current job. There isn’t a sufficient connection between his current employment income and his course so Louis can’t claim a deduction for his self-education expenses.

ATO Example 6: expenses only generally related to employment

Bert is employed as a salesperson. He enrols in a personal growth course which indicates participants will gain the following key benefits:

• being able to eliminate limiting beliefs and breaking destructive patterns
• learning proven ways to achieve success from closing a sale to achieving a goal
• creating a vision and learning how to align daily actions to reach desired outcomes
• tapping into unlimited energy and reaching a state of peak performance
• radically changing mindset
• harnessing incredible momentum to push the boundaries of success in every area of life.

Bert can’t claim a deduction for the cost of completing the course. The expenses are only generally related to Bert’s current employment duties so there isn’t a sufficient connection to Bert’s employment income.

Example: employment ceases while studying

Callum is an employee software developer. To improve his skills in his current employment, Callum starts a Graduate Diploma in Advanced Software and Network Technology. The course takes one year and is paid for in 2 instalments, which become due as each semester starts. Callum’s employer is supportive of his study and offers paid leave for Callum to study each week.

During semester one, Callum is made redundant. He chooses to continue studying the course while unemployed.

Callum can claim a deduction for the semester one payment as he was working and the course had a sufficient connection to his employment income at the time he incurred the expense.

Callum can’t claim a deduction for the semester 2 payment as he was unemployed at the time he incurred the expense and it wasn’t incurred in earning income.

ATO Example 7: employment commences while studying

Jock has a Certificate IV in Information Technology (Networking). After resigning from his job as a network administrator, Jock starts a Diploma of Information Technology (Advanced Networking) on a part-time basis while he is looking for a new job.

After completing the first 6 units of the Diploma, Jock is offered a full-time job as a network administrator. He commences work and continues studying his Diploma part-time.

The expenses Jock incurs to undertake the first 6 units of the Diploma are not deductible. The expenses were not incurred while Jock was earning income. The expenses Jock incurs on the remaining units will be deductible because the course has a sufficient connection to his employment income at the time he incurs them.

Above information is from ATO QC72165