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Edited version of private advice
Authorisation Number: 1051609090796
Date of advice: 10 March 2020
Subject: Work-related expenses - self-education expenses
Are you entitled to claim a full deduction for the expenses listed in Group A under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Are you entitled to claim a full deduction for the expenses listed in Group B under section 8-1 of the ITAA 1997?
No. However, you will be able to claim a partial deduction for these expenses for the portion of these expenses that can be reasonably apportioned as being attributable to you.
We have not ruled on the following question:
Are you entitled to claim a full deduction for the expenses listed in Group C under section 8-1 of the ITAA 1997?
This ruling applies for the following periods:
Year ending 30 June 2019
Year ending 30 June 2020
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You are a teacher and have been employed by your current employer (the School) for a number of years.
You are undertaking a Master's Degree with a University (the University) in a relevant field.
You requested and were granted time off by the School for a number of weeks during which you would travel overseas to complete a course (the Course) during part of your time overseas.
The Course was taught face to face at an overseas campus of the University over a period of XX days, starting at 9 am each day unless otherwise advised, and including activities such as lectures and workshops, site visits to places of significance, guest speaker presentations some days, day trips and an overnight visit. Weekends are free. Morning tea, afternoon tea, lunch and dinner are provided unless advised otherwise.
The Course covered issues that are pertinent to your employment with the School and which provided you with skills and knowledge specific to your current work activities.
You were overseas for a total of XX days departing Australia less than a week prior to the commencement of the Course, and returning to Australia around a week after the completion of the Course.
While completing the Course, you were accompanied on the overseas trip by your parents and your children.
Whilst completing the Course, you toured various areas and visited historical sites with your family in the country in which the Course was held.
The following expenses were incurred in relation to the overseas trip:
Course fees - paid by HELP debt
Note: The flight amount is the portion of the total flight costs you estimate that you have personally made to the extent that they apply to the Course
Note: The above amount has not been apportioned for payments that you have personally made in relation to the Course.
Taxis to campus
Travel to overseas sites
Overseas educational expenses
Travel other expenses
Other educational expenses
Resources & Education
Course fees - paid upfront
Note: The above amounts are deduction amounts you propose to claim in relation to the listed expenses.
You have not received an allowance or reimbursement from the School for any of the expenses incurred in relation to your trip.
You paid for expenses incurred in relation to you and your family's overseas travels, with any expenses incurred by your parents being reimbursed to them in full.
You did not keep a travel diary in relation to your travels, but have kept receipts.
Relevant legislative provisions
Income Tax Assessment 1997 section 8-1
Reasons for decision
We are satisfied that the Course was undertaken as part of your Master's Degree and that it has the necessary connection to your employment duties as a teacher. It is accepted that the Course will maintain and improve the skills and knowledge specific to your current work activities. Therefore, the expenses incurred in undertaking the Course have the necessary connection with earning your assessable income.
Based on the information provided you are eligible to claim a deduction for self-education expenses for the following expenses:
· $X,XXX for flight costs you have estimated that you incurred in relation to your personal flight in relation to the Course
· $X,XXX for course fees paid by FEE HELP; and
· $X,XXX for accommodation for your portion of the total accommodation costs incurred in relation to your family's overseas stay.
Section 8-1 of the Income Tax Assessment Act 1997 (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 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (TR 98/9) discusses the circumstances under which self-education expenses are allowable as a deduction. Paragraphs 12 to 15 of TR 98/9 provide:
12. Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer's current income-earning activities.
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. The fact that the study will 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) is not a sufficient basis in itself for self-education expenses to be deductible. This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
17. An expense is deductible under section 8-1 when it has the essential character of an income-producing expense. The essential character is to be determined by an objective analysis of all the surrounding circumstances. There are circumstances where apportionment under section 8-1 is required. For example, if a study tour or attendance at a work-related conference or seminar is undertaken for income-earning purposes and for private purposes, it is appropriate to apportion the expenses between the purposes. If the income-earning purpose is merely incidental to the main private purpose only the expenses which relate directly to the former purpose are allowable. However, if the private purpose is merely incidental to the main income-earning purpose, apportionment if not appropriate.
Numerous cases have been cited in TR 98/9 including the following cases:
In Case U109 87 ATC 657 (Case U109), the taxpayer was a science teacher who specialised in geology and was the head of the school science department. He undertook a 17 day trip to Indonesia organised by a natural museum history society of which he was a member. During the course of the trip he visited several volcanoes and other geological sites, and attended a geological congress. He also visited some tourist attractions. The taxpayer took many slides of the geological sites and prepared a taped commentary which he used in his teaching on his return. The Administrative Appeals Tribunal (AAT) examined previous court decisions dealing with teachers who had claimed for the cost of overseas travel. It concluded that although the taxpayer may have been a better teacher because of the travel, this fell short of the sufficient connection required between the travel and their income earning activities.
Case Q57 ATC 307 (Case Q57) involved an art teacher who travelled to Greece and Crete to update her knowledge and to keep abreast of art concepts so as to maintain and improve the quality and content of the subject she taught. The Board of Review found that the costs associated with the travel were not incurred by the taxpayer in the process of carrying out her duties as a teacher.
It is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income. Whether such a connection exists is a question of fact to be determined by reference to all the facts of the particular case.
Ordinarily if your self-education satisfies the conditions necessary to claim a deduction, you can claim expenses such as tuition fees payable under FEE-HELP, the cost of your meals and accommodation during temporary overnight absences from home to participate in self-education, course fees and expenses for your travel.
Application to your situation
In your case, in determining whether a deduction is allowable for self-education expenses we have examined all of the surrounding circumstances. You travelled overseas for a number of weeks accompanied by your parents and children. Whilst you were overseas you undertook the Course for a number of weeks, being a face to face course offered at the University's overseas campus as part of your Master's Degree. In addition to the course you and your family travelled in the overseas country and visited multiple historic sites.
You are currently employed full-time by the School. We acknowledge that the learning outcomes, skills and competencies that the Course imparts and develops are applied to your current work activities. The Course has relevance to your duties in education and schooling. Therefore the self-education expenses incurred in undertaking this Course have the necessary connection with earning your assessable income.
We have considered the expenses incurred in relation to the overseas trip as follows:
Airfares incurred on overseas work related conferences are deductible as they are a necessary part of attending the conference. The majority of the total costs for your family's overseas flight relates to the costs for your parents and children to fly overseas. Therefore, the majority of these costs are private in nature for which you cannot claim a deduction. However, you are entitled to claim a portion of the total costs for your family to fly overseas in relation to the cost of your flight. You have estimated that your portion of the flights for your family was $X,XXX and it is viewed that you can claim a deduction for that amount in relation to your flight costs.
Based on the information provided, it is viewed that you are upgrading your qualifications for your current employment by undertaking your Masters to improve your skills and knowledge that you use in your current employment. Therefore, as the Course has sufficient connection with your employment at the School, you can claim a deduction of $X,XXX for your FEE-HELP fees.
Accommodation costs totalling $X,XXX were incurred in relation to you and your family's overseas stay. The majority of these expenses relate to your family's accommodation whilst overseas. Any expenses incurred in relation to your family members cannot be claimed a deduction by you as they are private in nature and are not connected with your current employment.
However, we have applied Commissioner's discretion to allow a deduction for a portion of the overseas accommodation for the amount of $X,XXX in relation to your share of the total accommodation expenses as we are satisfied that the expense was incurred by you in relation to your stay, and that you are entitled to a deduction for it.
Based on the information provided with this ruling, we have determined that you are entitled to claim a total deduction for self-education expenses of $X,XXX under section 8-1 of the ITAA 1997 in relation to your overseas trip.