Edited version of private ruling

Authorisation Number: 1011528252187

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Ruling

Subject: Self education expenses

Question

Are you entitled to a deduction for the course fees and stationery costs incurred in relation to the subject that is directly related to your employment?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You are a practising specialist and have been for many years.

Recently you commenced a postgraduate course in a particular field. You undertook the course to expand your horizons and to enhance your skills across some interesting areas.

You acknowledge that the first few subjects of your course were not directly related to your employment although you believe the nexus between the course and your employment has come closer as you have progressed through the course.

You believe that the latest unit you have completed to have had a substantial impact on your day to day understanding and ability with regard to your files.

It is your intention to select units that are directly related to your employment for the final three units of the course.

You have incurred course fees and stationary expenses.

You have been utilising the FEE-HELP scheme to pay course fees.

You do not receive any allowance or direct support from your employer although your employer does acknowledge the benefits arising from the latest unit you studied.

You study generally in your own time and attend lectures in the evening outside work hours.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1,

Income Tax Assessment Act 1997 Section 26-20 and

Income Tax Assessment Act 1936 Section 82A.

Reasons for decision

Summary

You are entitled to a deduction for the course fees and stationery costs incurred in relation to the latest subject you studied as it is accepted that the study of this subject improved your skills and knowledge in your current income earning activities.

Detailed Explanation

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 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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

You have stated that the first four subjects of the course were not directly related to your employment. As such you are not entitled to a deduction for expenses incurred in relation to these subjects.

It is accepted that the latest subject you studied, maintained and improved the skills and knowledge you use in your current income-earning activities. As such you are entitled to a deduction for costs associated with completing this subject under section 8-1 of the ITAA 1997.

Course fees that meet the deductibility requirements of section 8-1 of the ITAA 1997 are not precluded from being deductible merely because you obtained a loan under FEE-HELP to pay for the fees.

However, you cannot claim a deduction for payments you make to reduce a FEE-HELP loan. Section 26-20 of the ITAA 1997 specifically denies the deduction.

That is, you can claim a deduction for your fees relating to your latest subject when the fees were incurred and paid through FEE-HELP, but you cannot claim for any repayments of your FEE-HELP debt you make at a later date.

Note that interest is not charged on the accumulated FEE-HELP debt. The debt is indexed annually on 1 June by adjusting it in line with any cost of living increases. This ensures that the real value of the debt is maintained and is not diluted by inflation. You are not entitled to a deduction for the indexation of your FEE-HELP debt.

The cost of stationery such as pens, pencils and photocopying, used in studying your latest subject, is also deductible under section 8-1 of the ITAA 1997.

Limitation to deductibility

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 of how this provision operates in relation to working out your self-education expenses is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on our website www.ato.gov.au or pages 37 and 38 of TaxPack 2010.

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