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Ruling

Subject: Self-education expenses

1. Are you entitled to a deduction for the expenses you will incur to complete your degree while employed in the health sector?

Yes.

2. Are you entitled to a deduction for the course fees you will incur to complete your degree?

No.

Relevant facts and circumstances

After you completed your first degree, you began employment in the health sector.

You are employed on a part-time basis. You also work on your university holidays.

You are currently undertaking a second degree on a full-time basis. You have the support of your employer to complete this study.

You are granted exemptions from some components of your degree due to the skills you practice in your current employment.

The content of your second degree overlap with the units you undertook in your first degree. They differ in the degree of detail and depth of knowledge.

The degree you are currently undertaking will enable you to treat more people and will lead to an increase in your pay. Once you gain these qualifications you will still be employed by the same employer. You are not undertaking the study to gain employment.

You have incurred expenses, including your course fees which you will pay up-front.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 26-20

Income Tax Assessment Act 1997 Paragraph 26-20(1)(ca)

Reasons for decision

Question 1

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, relate to the earning of exempt income or a provision of the ITAA 1997 prevents it.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. A deduction is allowable for self-education expenses if a taxpayer's current income earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

Similarly, 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, a deduction is allowable.

In your case, it is accepted that your degree will enhance the skills and knowledge that are required in the performance of your current employment duties. You will also receive a pay increase upon the completion of your degree.

Consequently, the self-education expenses incurred in undertaking this degree have the necessary and relevant connection with the earning of your assessable income.

The costs you have incurred (excluding your course fees) are therefore deductible as self-education expenses under section 8-1 of the ITAA 1997.

Please note that the self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on the Tax Office website at www.ato.gov.au.

Question 2

Paragraph 24 of TR 98/9 explains that HECS fees payable for courses supported by the Commonwealth government under HECS (now known as HECS-HELP) are not an allowable deduction under section 8-1 of the ITAA 1997. This is because paragraph 26-20(1)(ca) of the ITAA 1997 specifically prevents a deduction for payments made under the Higher Education Support Act 2003 (HESA 2003).

You will pay your course fees up-front.

As these will be payments made under HESA 2003, paragraph 26-20(1)(ca) of the ITAA 1997 prevents you from claiming a deduction for your course fees.

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