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Ruling

Subject: Self-education expenses

Question 1

Can you claim a deduction for university fees and a mandatory non-residential college membership fee paid in connection with a self-education course (the Course) at a overseas University (the University), in your tax return for the relevant year?

Answer

Yes.

Question 2

Can you claim a deduction for a portion of the cost of flights to country A, via Country B, to undertake the Course, in your tax return for the relevant year?

Answer

Yes.

Question 3

Can you claim a deduction for a portion of the flight costs from the Country A to Australia in your tax return for the relevant year?

Answer

Yes.

Question 4

Can you claim a deduction for the cost of textbooks, stationery and photocopying credits purchased in the 20XX financial year, in your tax return for the relevant year?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You commenced your employment with an Australian firm (the Firm) under a graduate program. After completion of the program you were employed as a professional and placed in the Group A of the Firm.

As a professional in that area you were required to perform a variety of tasks.

You commenced your leave of absence from the Firm in the 20XX financial year to undertake the Course at the University in Country A.

The course will further develop your skills and knowledge. In addition, the subjects you have undertaken in the Course will expand your knowledge in areas relevant to your employment position in the Firm.

The course will also make you a more effective practitioner and increase your professional reputation, which will in turn increase your income generating potential.

Partners of the Firm expressed support for your program of study, and provided you with a leave of absence from your employment. However they did not provide you with financial support.

You will return to the Firm and the same employment position when you return to Australia.

You departed Australia for Country B in the relevant financial year, and departed Country B for the Country A after a short stay. Your time spent in Country B was for private purposes.

Your course commenced in Country A in the relevant financial year, and will be completed later that financial year. You plan to holiday in neighbouring countries until your graduation, and will depart direct to Australia soon after.

You plan on purchasing the return flight some time in the relevant financial year.

The expenses you have/will incur in relation to the Course are:

In order to undertake the Course, you must be enrolled in both the University and a constituent college of the University.

You plan on apportioning the airfares taking into account the private components, being the time spent on holidays in the country B and country A, and the difference in flight costs of direct flights from Australia and country A, and Australia and country A via country B.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

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).

Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education.

In your case, you were employed as a professional when you took a leave of absence to undertake the Course. You incurred self-education expenses in relation to the Course, including compulsory college membership fees which were a requirement of the Course.

It is considered that the study will maintain or improve your skill or knowledge used in your income earning activity. Therefore, you are entitled to a deduction for the University course fees, the mandatory college membership fees, textbooks, stationery and photocopying credits, and a portion of the cost of return flights between Australia and country A/B.

Note

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 our internet website at www.ato.gov.au.

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