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Edited version of private advice
Authorisation Number: 1012630195778
Subject: Self-education Expenses
Question 1
Are you entitled to a deduction for the course fees incurred?
Answer
Yes
Question 2
Are you entitled to a deduction for the registration fees and exam fees incurred to undertake an exam that allows you to practice your profession outside of Australia?
Answer
No
Question 3
Are you entitled to a deduction for the admission registration fees incurred to enable you to practice your profession outside of Australia?
Answer
No
Question 4
Are you entitled to a deduction for your travel, accommodation and incidental expenses incurred whilst overseas to sit your exam?
Answer
No
Question 5
Are you entitled to a deduction for self-education expenses for the flights and accommodation incurred when visiting potential education institutions?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commences on
1 July 2012
Relevant facts and circumstances
You are employed as a professional.
You travelled to meet with co-ordinators of prospective education institutions.
You enrolled in an online course to allow you to study and work at the same time.
The course covers subjects which area frequently in your employment in Australia.
The course does not provide any qualifications, however it prepares you to undertake an exam which will allow you to practice your profession outside of Australia.
Your employer has agreed to provide paid study leave while you complete the course.
Your employer has also agreed to offer you a salary increase should you complete the course. There will also be a review of your position with a possibility of a promotion.
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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (Taxation Ruling TR 98/9) discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where:
• the taxpayers income-earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge, or
• the study of the subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayers' income from their current income-earning activities in the future.
No deduction is allowable for self-education expenses if the study is:
• to enable the taxpayer to get employment
• to obtain new employment, or
• to open up a new income-earning activity (whether in business or in the taxpayers current employment).
Several court cases have established general guidelines in determining the deductibility of self-education claims. FCT v. Maddalena (1971) 2 ATR 541; (1971) 45 ALJR 426; 71 ATC 4161, supports our view that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or to obtain new employment. Such expenses would come at a point too soon to be properly regarded as incurred in gaining assessable income.
Course
Taxation Ruling TR 98/9 states that a deduction is allowable for self-education expenses if the subject of self-education leads to, or is likely to lead to, an increase in the taxpayer's income from current income-earning activities (Federal Commissioner of Taxation v. Hatchett (1971) 125 CLR 494; 71 ATC 4184; (1971) 2 ATR 557).
In your case your employer supports your decision to complete further study to expand your knowledge and have offered you a salary increase on the completion of the course. It is also considered that the course will improve your existing skills and knowledge in your profession. Therefore you are entitled to claim self-education expenses under section 8-1 of the ITAA 1997 for the course fees related to your studies.
Exam
The successful completion of the exam makes you eligible for admission to practice your profession outside of Australia. The benefits for you came from undertaking the study and not the actual exam.
Although the successful completion of the exam has increased your employability, when viewed objectively, the exam in effect opens up a new area of employment for you as you are able to practice your profession outside of Australia.
Expenses associated with opening up a new area of employment are considered to be capital in nature. Therefore the costs associated with undertaking the exam are not deductible.
Travel and Accommodation
Paragraphs 88 and 89 of TR98/9 state that expenditure on accommodation and meals ordinarily has the character of a private or domestic expense. Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meals expenses incurred are deductible under section 8-1 of the ITAA 1997. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. This is not considered expenditure that is of private nature because the taxpayer is required to travel away from home for income-producing activities.
Travel to sit exam
You are intending to travel to overseas to attend an exam. As the exam is considered to be capital in nature all associated travel, accommodation and living expenses incurred while travelling and completing the exam are also capital in nature. Therefore costs associated with travelling to complete the exam are not deductible.
Prior to study
You incurred expenses for travel and accommodation to view prospective education institutions. At the time you had not determined where you were going to study. The intention of the travel was to solely view potential education institutions; there was no educational study or course completed at the time.
Therefore, you are unable to claim travel expenses as self-education expenses under section 8-1 of the ITAA 1997 because the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.
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