Edited version of private ruling

Authorisation Number: 1011539556445

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Ruling

Subject: Self education expenses - Masters of Law

Questions

1. Are you entitled to a deduction for self-education expenses incurred in undertaking a Masters of Law?

Answer: Yes.

2. Are you entitled to a deduction for your course fees if you obtain a loan under FEE-HELP to pay them?

Answer: Yes.

This ruling applies for the following periods:

Year ended 30 June 2011.

Year ended 30 June 2012.

Year ended 30 June 2013.

Year ended 30 June 2014.

The scheme commences on:

1 July 2010.

Relevant facts and circumstances

You completed a Bachelor degree and commenced employment.

You were promoted and as a result of the promotion you have been given more technical responsibilities. In your current role you provide general law and technical support. This role requires you to regularly research and understand Australian legislation and case law and apply this knowledge to resolve complex technical issues that arise.

In order to improve your general legal skills that you regularly encounter you applied to a University to undertake a Masters of Law. This degree is specifically designed for non-law graduates who wish to obtain a degree in law.

The course is completed on a part- time basis while you continue employment.

Whilst undertaking this course you will incur several expenses. The place you have been offered is a Domestic Full-Fee place. You intend to apply for a FEE- HELP loan to cover the cost of the course fees incurred. Other expenses that you will incur throughout undertaking this course include text-books, stationary, travel expenses, and depreciation of your laptop. You will not receive any allowance from your employer for the reimbursement of the costs you incur for completing this degree.

You have been encouraged by your employer to complete this degree and have been approved paid study leave whilst undertaking this course. The type of paid leave you will receive is leave to attend classes during working hours, travel time to and from work during working time, personal study time per week and exam leave.

You have provided a letter from your employer confirming their support for the course.

Your manager stated in a letter provided:

…..his work will be enhanced, and his capabilities relevant to our work will be further developed by him undertaking the proposed course

… I had no hesitation in recommending him for these studies based on the opportunity for his development and the importance of this to his current role

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1936 Section 82A

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities.

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; (1961) 8 AITR 406).

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.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 and paragraphs 15, and 48 - 62 of TR 98/9).

TR 98/9 provides that expenditure on course fees, text books, stationery and travel are allowable deductions.

Application to your circumstances

You currently work in an area that requires you to interpret various types of legislation. The information provided in your application for a private ruling and the letter provided by your manager both support the course undertaken as providing you with the knowledge and skills which will assist you in performing your duties to a high standard.

Your self-education expenses are considered to have the relevant connection to your income earning activities. Therefore, you are entitled to a deduction for your self-education expenses under section 8-1 of the ITAA 1997.

FEE - HELP

FEE-HELP for eligible fee-paying students enrolled at an eligible higher education provider or Open Universities Australia. FEE-HELP provides students with a loan to cover up to the full amount of their tuition fees to a maximum of $50,000 over their lifetime. This type of student loan scheme was formally known as PELS or BOTPLS.

FEE-HELP was introduced by the Commonwealth to provide assistance to students who are not supported by the Commonwealth to pay course fees. If the student meets the requirements for eligibility for a deduction for self education expenses the whole course fee is deductible. The student is not prevented from claiming a deduction because assistance to pay all or part of the course fee was received under FEE-HELP.

The course fee is tax deductible in the year the expense is incurred, that is, the year in which the study is undertaken.

Application to your circumstances

Whilst your self-education expenses are considered to have the relevant connection to your income earning activities, your course fees are deductible even if you obtain a loan under FEE-HELP to pay them.

Limit to the deductibility of self-education expenses 

It should be noted that in certain circumstances self-education expenses incurred in connection with a 'prescribed course of education' may be reduced by up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936 (ITAA 1936). However, you may have other types of expenses, some of which are not allowable as a deduction that can be offset against the $250 before you have to reduce your claim for allowable expenses.

An explanation on how section 82A of the ITAA 1936 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 the Tax Office website.

Note: At this point in time, your self-education expenses are considered to have the relevant connection to your income earning activities. However, if your duties change, you may need to apply for another private ruling.

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