As a result of the attention placed on these claims, audit adjustments and penalties being imposed on individuals are a common occurrence.  Outlined below are two examples of cases that the ATO had adjusted and imposed penalties on the respective individuals. In both instances the individual was unable to demonstrate a sufficient nexus between the course that they claimed and their current employment.

The requirement to demonstrate a nexus will generally be satisfied when the self-education activity achieves the following criteria:

  • It enables taxpayer to be more proficient in carrying out their current income earning activities
  • It objectively leads to an increase from their current income earning activities.

Ting v Federal Commissioner of Taxation [2015] AATA 166

In the 2013 income year, Ting was employed as a high school teacher and had undertaken a post graduate course in management of which he completed 6 subjects. He claimed a deduction under self education expenses as he believed the course would make him more likely to obtain a promotion to the position of a ‘lead teacher’ and future principal.

However, the full amount of the deduction was not allowed by the tribunal and a deduction for two subjects being financial accounting and marketing were denied.  The tribunal stated that their was not a sufficient nexus between the subjects and his current income earning activity as a classroom teacher.

Thomas v Federal Commissioner of Taxation [2015] AATA 687

Mr Thomas was working as an associate director for NAB’s private equity team. In July 2012 he was accepted to complete his MBA in Paris commencing January 2013. However, he was made redundant in November 2013 although he had already paid for his visa, flights and the first of three instalments for the course.

It was ultimately determined that the costs incurred prior to him being made redundant were in fact deductable self education expenses. However, the tribunal determined that the remaining course fees were not deductable as the nexus between Mr. Thomas’ current income earning activities and the course was no longer present as he had been made redundant

It can be demonstrated through these two cases that at times it can be difficult to correctly claim work related self-education expenses in your individual tax return. This is often due to the difficulty in demonstrating the nexus between your current income producing activities and the course undertaken.

If you are unsure on whether your self education course in its entirety is deductible or if particular subjects are deductible please contact The Quinn Group on (02) 9223 9166 or submit an online enquiry. Our team of tax accountants and tax lawyers will be able to legally maximise your claim on your individual tax return and ensure that you do not incur any penalties for incorrectly claiming a deduction.