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Edited version of your written advice

Authorisation Number: 1012693130966

Ruling

Subject: Self-education

Question 1

Are you entitled to a deduction for self-education expenses for your postage and parking at the university?

Answer

Yes.

Question 2

Are you entitled to a deduction for the relevant work related portion of your headphones as part of your self-education expenses?

Answer

Yes.

Question 3

Are you entitled to a depreciation deduction for the bookcase and the relevant work related portion of your laptop and smartphone as part of your self-education expenses?

Answer

Yes.

Question 4

Are you entitled to a deduction for Higher Education Contribution Scheme (HECS) fees as a self-education expense?

Answer

No.

Question 5

Are you entitled to a deduction for the cost of your shoes?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

The arrangement that is the subject of the Ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

You are currently studying.

You commenced your studies in 2014 and hope to finish your studies in two years.

You are currently working in the same field. You started working for this employer in 20XX.

On completion of your degree you will be on a higher income.

Your studies are helping you with your current duties and have provided you with additional knowledge.

You incurred the following expenses:

You use your smart phone to access the internet at times when you don't or can't have your computer. Other functions such as the calculator are also useful.

You also incurred costs for black leather closed-in shoes that you purchased from a conventional store. Your employer requires you to wear these shoes for work.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1997 Section 26-20.

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, or a provision of the ITAA 1997 prevents it.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business 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).

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, it is accepted that the studies will maintain or enhance the skills that are required in the performance of your current employment duties. Consequently the self-education expenses incurred in undertaking the course 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.

Expenses incurred on the cost of university parking fees and postage are considered self-education expenses and are allowable as deductions under section 8-1 of the ITAA 1997 to the extent that they relate to your assessable income.

The portion of your headphone costs that relate to your studies is also an allowable deduction.

Depreciation

The purchase of the bookcase, a laptop and smartphone are regarded as capital items and therefore a deduction is not allowed under section 8-1 of the ITAA 1997.

Section 40-25 of the ITAA 1997 allows a deduction for the decline in value of a depreciating asset held for the purpose of producing assessable income during the year. Only the income producing portion of the decline in value is deductible.

The cost of the bookcase, if it used predominately for self-education purposes, is deductible in full in the year of purchase.

Your laptop and smartphone are regarded as depreciating assets. A deduction is allowable for the depreciation of the work related use of the laptop and smartphone, that is, the portion that relates to your studies. Please refer to Guide to depreciating assets 2014, with is available on our website www.ato.gov.au for further details.

The deduction must be apportioned between work-related and private use.

Please ensure you keep the necessary substantiation of your expenses in relation to any deduction claimed. This includes a diary or similar record to show the work related use of your laptop and smartphone.

HECS

Section 26-20 of the ITAA 1997 denies a deduction for certain higher education payments. HECS payments, whether up-front or deferred, are specifically non-deductible and therefore no deduction is allowed.

TR 98/9 confirms this and explains that HECS fees payable for courses supported by the Commonwealth government under HECS (now known as HECS-HELP) are not an allowable deduction. This is so whether they are paid up front as a discounted amount, or deferred for payment at a later date in an annual income tax assessment.

Therefore, although your course is related to your income earning activities, you are not entitled to a deduction for your HECS fees because a provision of the ITAA 1997 specifically prevents it.

Shoes

Expenditure on shoes is generally treated as a private expense and therefore not deductible under section 8-1 of the ITAA 1997. 

A deduction is allowable for expenditure on footwear specifically designed to provide protection to the employee at work, for example, special non-slip shoes.

However, a deduction is not allowable for the cost of ordinary conventional footwear such as running shoes, sports shoes and casual shoes, as it is considered ordinary footwear is not protective. We consider that the cost of this footwear is a private expense and is not an allowable deduction.

Although your employer requests that you wear black leather closed-in shoes, this does not make the cost of purchasing your shoes an allowable deduction. Your shoes are regarded as ordinary footwear. Expenditure on your shoes is not an allowable deduction as there is not a sufficient connection between the expenditure and your income earning activities. Also the shoes are regarded as a private expense. Therefore no deduction is allowed.

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