| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1013056094588
Date of advice: 21 July 2016
Ruling
Subject: Self-education expenses and HELP
Question 1
Are you entitled to claim a deduction for your self-education expenses incurred in completing a Master's degree?
Answer
Yes.
Question 2
Are you entitled to a deduction for Higher Education Loan Program (HELP) fees as a self-education expense?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2016
The scheme commenced on
1 July 2015
You are employed as a Project Engineer.
The duties you undertake are as follows:
• Manage personnel
• Manage sub-contractors on site
• Manage project costs, invoices, estimates and forecasting
• Manage client relationships
• Manage support team outputs (stakeholder/community/safety/quality and commercial services)
• Manage design process
You are undertaking a Master's degree to further increase your current skills and knowledge.
You provided a copy of the Commonwealth Assistance Notice from the educational institution, which confirms the course fees are funded by the Commonwealth Government and the Master's degree has FEE-HELP status.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 26-20
Reasons for decision
Deductibility of 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 where the outgoings are of a capital, private or domestic nature.
A number of significant court decisions have determined that for an expense to be an allowable deduction:
• it must have the essential character of an outgoing incurred in gaining assessable income or, in other words, of an income-producing expense (Lunney v. FC of T; (1958) 100 CLR 478),
• there must be a nexus between the outgoing and the assessable income so that the outgoing is incidental and relevant to the gaining of assessable income (Ronpibon Tin NL v. FC of T, (1949) 78 CLR 47), and
• it is necessary to determine the connection between the particular outgoing and the operations or activities by which the taxpayer most directly gains or produces his or her assessable income (Charles Moore Co (WA) Pty Ltd v. FC of T, (1956) 95 CLR 344; FC of T v. Hatchett, 71 ATC 4184).
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).
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.
In your case, it is accepted that the MBA 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.
Deductibility of course fees paid under HELP
Section 26-20 of the ITAA 1997 denies deductions for certain HELP and student assistance payments.
Paragraph 26-20(1)(ca) of the ITAA 1997 specifically prevents a deduction for student contribution amount paid to a higher education provided in relation to FEE-HELP debt.
Paragraph 26-20(1)(cb) of the ITAA 1997 specifically prevents a deduction to reduce FEE-HELP debt.
In your case, your course fees are paid under the FEE-HELP system. That is, you have not incurred these fees as the Commonwealth has paid the course fees on your behalf.
You will, however, be obliged to make payments either as voluntary up-front payments or later as part of your income tax assessments under FEE-HELP. In accordance with section 26-20 of the ITAA 1997, you are not entitled to a deduction for these payments.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
