Edited version of your written advice

Authorisation Number: 1012963984612

Date of advice: 29 February 2016

Ruling

Subject: Self education expenses

Question 1

Are you entitled to claim a deduction for all your self-education expenses associated with a course of education held overseas?

Answer

No

Question 2

Are you entitled to a deduction for the cost of your airfares between Australia and the overseas country?

Answer

Yes

Question 3

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

Answer

Yes

Question 4

Are you entitled to a deduction for the cost of your accommodation and meals?

Answer

No

Question 5

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

Answer

Yes

This ruling applies for the following period(s)

Year ended 30 June 2016

Year ended 30 June 2017

The scheme commences on

1 July 2015

Relevant facts and circumstances

The arrangement that is the subject of the private 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:

• the application for private ruling dated early January 20XX

• further information received via email dated early February 20XX

You are employed full time with an investment fund manager.

Your role is to research and prepare infrastructure investment strategies and to help execute transactions.

You have enrolled in a Master Business Administration (MBA) in an overseas country. The duration of this course is one year.

You will be undertaking the following mandatory subjects:

• Financial accounting

• Financial markets and valuation

• Organisational behaviour

• Prices and markets

• Uncertainty, Data and Judgement

• Corporate financial policy

• Managing Customer value

• Managerial accounting

• Process and operations management

• Principles of Strategy analysis

The course will further develop your skills. You currently require relevant skills in your present position and will further enhance your skills and competency allowing you to improve your current skills and lead to an increase in future income in your present position.

Your employer has approved one year of leave without pay for you to undertake your course.

You are not receiving any reimbursement or allowance from your employer towards your course of study.

You are funding your own education expenses.

You will incur the following expenses:

• Airfares

• Course costs

• Accommodation and meals

• Internet usage

You will be remaining overseas while undertaking the course

You will not maintain a residence in Australia while you are overseas but plan on leasing out your home for 1 year during the course of your studies.

You plan on leasing apartment accommodation with a formal lease agreement in the overseas country.

You will be accompanied by your family.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-115

Income Tax Assessment Act 1997 Section 900-120

Reasons for decision

Work-related self-education expenses

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 to the extent to which they are of a capital, private or domestic nature, or relate to the earning of exempt income. 

Taxation Ruling TR 98/9 discusses the deductibility of self-education expenses.

Paragraph 13 of TR 98/9 states: 

If a taxpayer's 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, the self-education expenses are allowable as a deduction. 

Thus, self-education expenses incurred by a taxpayer will qualify for deduction under section 8-1 of the ITAA 1997, if there is a sufficient nexus to the production of assessable income and the improvement of a skill or some specific 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.  

Paragraph 23 of TR 98/9 states that subject to the general tests under section 8-1 of the ITAA 1997 being met, the following types of expenses relating to approved self-education are allowable deductions;

• course or tuition fees of attending educational institutions, conferences or seminars

• the cost of professional and trade journals, text books and stationery

• airfares incurred on overseas study tours, on work-related conferences or seminars, or attending educational institutions

• where a taxpayer is away from home overnight or temporarily, accommodation and meal expenses incurred on overseas study tours, conferences or seminars, or attending an educational institution

In your case, it is accepted that the course will maintain or enhance the skills that are required in the performance of your current role. Consequently, the self-education expenses incurred have the necessary and relevant connection with the earning of your assessable income. You are therefore entitled to a deduction under section 8-1 of the ITAA 1997 for self-education expenses.

Course fees

You have demonstrated that the course of education has a nexus to your current employment. Therefore, as outlined in TR 98/9 you are allowed a deduction for your course fees incurred in attending an educational institution under section 8-1 of the ITAA 1997.

 Airfares 

You will incur the expense of airfares in travelling to the overseas country to attend an educational institution; you will therefore be entitled to a deduction for these costs under s 8-1 of the ITAA1997.

Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims. 

Accommodation and meals

Whilst in the overseas country, you will incur accommodation, food and personal expenses. Expenditure on accommodation and food ordinarily has the character of a private or domestic expense. However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense.  Paragraph 89 of TR 98/9 outlines:

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. (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. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities.

However, where it is considered that a taxpayer has established a new place of residence, the accommodation expenses will retain its private nature and will not be deductible.

TR 98/9 states:

The key factors to be taken into account in determining whether a new home has been established include:

• the total duration of the travel;

• whether the taxpayer stays in one place or moves frequently from place to place;

• the nature of the accommodation, e.g., hotel, motel, long term accommodation;

• whether the taxpayer is accompanied by his or her family;

• whether the taxpayer is maintaining a home at the previous location while away.

• The fact that the taxpayer did not maintain a home while away for an extended period was the decisive factor in characterising expenditure on accommodation and meals as private 'living expenses' in a series of Board of Review decisions: Case N13 13 TBRD (NS) 45; 10 CTBR (NS) Case 98; Case N16 13 TBRD (NS) 65; 10 CTBR (NS) Case 99; Case N19 13 TBRD (NS) 76; Case N20 13 TBRD (NS) 79; and

• the frequency and duration of return trips to the previous location.

In your case you will be overseas for approximately 12 months. You will be accompanied by your family and staying in an apartment. You will not be returning home or maintaining a residence in Australia whilst you are away.

Therefore you are not entitled to claim a deduction relating to accommodation, meals and personal expenses. In these circumstances, expenditure is private in nature and not allowable under section 8-1 of the ITAA 1997.

Internet expenses

PS LA 2001/6 states that Internet usage in relation to a course of self-education may be deductible where a nexus can be established between the internet usage expenses and the income earning activity. However, any personal internet usage (as well as by other occupants) must be considered when determining the work related percentage. Paragraph 9 states the two primary measures that can impact on work component percentage include:

• the time spent by the taxpayer using the internet for work purposes compared to time spent by all occupants using the internet for private purposes (time basis) and

• data used for work purposes compared to data used for private purposes of all occupants (data basis)

Where itemised internet accounts are not available, a reasonable estimate of work related internet expenses, based on diary entries of usage over a period of one month, together with relevant paid internet accounts, will be acceptable for substantiation purposes.

Other relevant comments

Pre requisites for deductions

The deductibility of any work related expenses are subject to the substantiation rules as outlined in Division 900 ITAA1997.

Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims. 

Pursuant to sections 900-115 or 900-120 of the ITAA 1997, these expenses must be substantiated by a document setting out the following: 

• the name or business name of the supplier of the goods or service, or asset

• the amount of the expense, or the cost of the asset

• the nature of the goods or service, or asset

• the day the expense was incurred, or asset was acquired, and

• the day the document was made out. 

ATO view documents

Taxation Ruling TR 95/20

Taxation Ruling TR 98/9

PS LA 2001/6

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