ATO Interpretative Decision

ATO ID 2005/26

Income Tax

Deductions: self education - course fees paid from FEE-HELP loan funds
FOI status: may be released
Status of this decision: Decision Current
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 full-fee paying students Higher Education Loan Programme (FEE-HELP), 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 under FEE-HELP 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 course is relevant to the taxpayer's current field of employment and will improve their existing skills and knowledge.

The taxpayer received a loan under the terms of FEE-HELP contained in Part 3.3 of Chapter 3 of the Higher Education Support Act 2003 to pay their course (tuition) fees.

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 FEE-HELP, 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 FEE-HELP.

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 FEE-HELP would not change this.
Note 2: 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 FEE-HELP.

Date of decision:  7 January 2005

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   section 26-20

Higher Education Support Act 2003
   Part 3.3 of Chapter 3

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

Keywords
Education courses
Education expenses
Self education expenses
Tertiary course
Tuition expenses

Siebel/TDMS Reference Number:  4330295

Business Line:  Small Business/Individual Taxpayers

Date of publication:  21 January 2005

ISSN: 1445-2782


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