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ATO Interpretative Decision

ATO ID 2003/35 (Withdrawn)

Income Tax

PELS - deductibility of course fees
FOI status: may be released
  • This ATO ID is withdrawn from the database as the application of section 8-1 of the ITAA 1997 to the course fees is adequately covered by Taxation Ruling TR 98/9. The deductibility of the repayments of a PEL loan is addressed in ATO ID 2002/463
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Status of this decision: Decision Withdrawn 6 August 2010
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for course fees paid where the taxpayer has obtained a loan for those fees under the Post-graduate Education Loan Scheme (PELS) and the course is directly related to their current income earning activities?

Decision

Yes. The taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for course fees paid where the taxpayer has obtained a loan for those fees under the PELS and the course is directly related to their current income earning activities.

Facts

The taxpayer is enrolled in a course of study at an Australian University.

The taxpayer received a loan under the terms of the PELS.

The course of study undertaken by the taxpayer will improve their skills and knowledge in their current field of employment and if successfully completed, will lead to a future pay increase.

The taxpayer has incurred expenses associated with the course such as student fees, books and stationery.

Reasons for Decision

Section 8-1 of the 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.

Taxation Ruling TR 98/9 explains how this provision applies to self-education expenses. Paragraphs 13-15 of TR 98/9 states that:

13.
If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.
14.
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, the self-education expenses are allowable as a deduction.
15.
No deduction is allowable for self-education expenses if the study is to enable a taxpayer to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in the taxpayer's current employment)...

The course of study is directly related to the taxpayer's current income earning activities and is likely to lead to an increase in the taxpayer's income. Even though the taxpayer has obtained a loan for all or part of the fees for the course under the PELS, this does not preclude the taxpayer from claiming a deduction for the expenses incurred in relation to the course.

Accordingly, the taxpayer is entitled to a deduction under section 8-1 of the ITAA 1997 for expenses paid for the course of study as it is directly related to their current income earning activities, even though they have obtained a loan for all or part of those fees under the PELS.

Note 1: If the taxpayer's course has no connection with their current income earning activities then their course expenses would not be deductible under section 8-1 of the ITAA 1997. The fact that the taxpayer may have a loan under the PELS would not change this.
Note 2: Paragraph 26-20(1)(a) of the ITAA 1997 prevents deductions in regard to contributions made under Chapter 4 of the Higher Education Funding Act 1988. Chapter 4 deals with the Higher Education Contributions Scheme. There is nothing in section 26-20 of the ITAA 1997 or other taxation provisions preventing a deduction for course fees where the taxpayer has obtained a loan under the PELS.

Date of decision:  27 November 2002

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   section 26-20
   paragraph 26-20(1)(a)

Related Public Rulings (including Determinations)
Taxation Ruling TR 98/9

Related ATO Interpretative Decisions
ATO ID 2002/463
ATO ID 2003/33
ATO ID 2003/34

Keywords
Higher Education Contribution Scheme
Education expenses
Self education expenses

Business Line:  Business & Personal Tax Centre of Expertise

Date of publication:  14 February 2003

ISSN: 1445-2782

history
  Date: Version:
  27 November 2002 Original statement
You are here → 6 August 2010 Archived

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