Edited version of private ruling

Authorisation Number: 1011836298840

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Ruling

Subject: Self education expenses

Question

Are you entitled to a deduction for self education expenses incurred during the period you were on leave without pay?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are employed as a manager.

In the 2009-10 financial year you were undertaking a Masters in Business Management.

Your employer fully supports your studies and provides exam leave when required.

You took leave without pay for part of the 2009-10 financial year, but then returned to your position.

You have incurred expenses in relation to your course, including tuition, stationary and reference materials.

You used FEE-HELP to pay for your university course tuition fees.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision

Summary

The expenses you have incurred in undertaking your course have the necessary and relevant connection with the earning of your assessable income and are therefore deductible.

Detailed reasoning

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 in which self education expenses are allowable as a deduction including where a taxpayer's current 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.

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, you are employed as a manager. It is accepted that the Masters course will assist you to carry out your daily duties. The fact that you were on leave without pay for part of the period you were studying does not sever the connection with your employment as you were still employed during that time.

As the Masters course will enhance your existing skills and knowledge required in your current employment, the tuition fees, stationary and reference materials you have incurred have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997.

Further information

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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