Edited version of your written advice

Authorisation Number: 1051229198168

Date of advice: 7 July 2017

Ruling

Subject: Work related expenses

Question 1

Can you claim a deduction for the enrolment fee connected with the self-education long course or alternatively, short course?

Answer

Yes

Question 2

Can you claim a deduction for the travel, accommodation and meal costs associated with undertaking the short course?

Answer

Yes

Question 3

Can you claim a deduction for the travel, accommodation and meal costs associated with undertaking the long course?

Answer

No

Question 4

Can you claim a deduction for the interest on the loan taken out to cover enrolment fees for the long and short course?

Answer

Yes

Question 5

Can you claim a deduction for the incidental self-education expenses including a decline in value of electronic equipment, text books and journals for both the long and short courses?

Answer

Yes

This ruling applies for the following periods:

Year ending 201C

Year ending 201D

Year ending 201E

The scheme commences on:

1 July 201B

Relevant facts and circumstances

You are employed as an Engineer with business X.

Your current position description describes the purpose of your role as:

● Maintaining a compliant and fit for purpose system. Performing and managing design and investigation activities for specific systems. Other duties and responsibilities you perform in undertaking your current role include:

● Undertake duties as an engineer for designs within your delegated authority.

● Establish compliance with the configuration management requirements.

● Participate in safety review boards and associated investigations.

You are proposing to enrol in the 201C-1D income year in either a long or short course. The long course is offered over XX weeks and the short course is conducted over X weeks.

Both courses are open to engineers subject to meeting the age, English proficiency requirements and passing a medical test.

You anticipate taking XX week’s annual leave and the remainder leave without pay to attend the XX week long course. If you were to enrol in the short course, you would utilise your annual leave to complete the X week course. You have not asked your employer to contribute towards either the long or short course or provide study leave.

You believe both courses will allow you to improve your skills and knowledge and proficiency to undertake your current engineering role.

You and your supervisor identified the benefit of you undertaking specific training in your role as part of the performance review process in late 201A.

Upon completing either the short or long course, you will able to return to your current role. Completing either course would not provide you with an opportunity to transition into another role as there is no such designated position within your organisation.

There is no expectation that you would be promoted to another role or higher position as a result of completing either course.

You intend to pay course and other course related expenditure in the 201C-1D income year. You have not approached your employer about contributing to the course fees, but they are encouraging and supportive of you completing the course and you have discussed your proposed leave arrangements with them.

You have indicated that if you were successfully accepted into the long course, you would relocate overseas with your partner and children for the duration of the course and reside together in either a furnished apartment or hotel for the duration of the XX week training. You would leave your possessions within your house located in Australia for the duration of the course of study and given the relative short duration of the course, would not rent out your house in Australia.

If you were accepted into the short course, you will travel overseas and stay in temporary accommodation for the X week period. Your spouse and family will remain in Australia in your home.

Apart from enrolment fees, you would like to claim the following self-education expenses:

● accommodation

● meals

● return flights to attend the training

● interest on a loan taken out cover enrolment and other self-education expenses

● incidental costs such as a decline in value of text books, journals and any IT devices connected with the course of study.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1.

Income Tax Assessment Act 1936 Section 82A

Reasons for decision

Question 1

Summary

You are entitled to claim the enrolment fee for the long and short course as a self-education in excess of $250.00 as a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

Detailed reasoning

Section 8-1 of the 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.

The Commissioner’s view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income Tax: deductibility of self-education expenses incurred by an employee or person in business (TR 98/9). In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 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 (paragraph 12 of TR 98/9 and referred to within FC of T v Finn (1961) 106 CLR 60 (Finn’s case)); or

● 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 their current income earning activities in the future (paragraph 13 TR 98/9 and referred to in the case of FC of T v Hatchett (1971) 125 CLR 494 (Hatchett’s case)).

However, self-education expenses will not be deductible if the study is intended to:

● enable you to get employment

● enable you to obtain new employment

● to open up a new income earning activity (whether in business or in your current employment).

If self-education expenses are allowable under section 8-1 ITAA 1997 but also fall within the definition of 'expenses of self-education’ in section 82A of the Income Tax Assessment Act 1936 (ITAA 1936), section 82A of the ITAA 1936 operates to limit the amount of expenses otherwise allowable under section 8-1 by $250.

Expenses of self-education as defined in subsection 82A(2) of the ITAA 1936 includes expenses that are 'necessarily incurred’ for or in connection with a prescribed course of education. Compulsory and unavoidable expenses, 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’.

A 'prescribed course of education’ as defined under section 82A of the ITAA 1936 requires an element of continuity and ongoing instruction or training.

The long and short courses are both prescribed courses of education offered by an education institution, undertaken by you for the purposes of gaining qualifications for use in carrying on your profession as an engineer in the course of your employment.

There is nexus between both the long and short course, allowing you to maintain or improve your knowledge and skill in gaining your assessable income as an engineer and therefore either course would be considered as a self-education deduction under section 8-1 of the Income tax Assessment Act 1997 and therefore you would be entitled to claim a deduction for the enrolment costs of either course in excess of $250.00.

Question 2

Summary

The travel, accommodation and meal expenses you incur in completing the short course are considered deductible self-education expenses.

Detailed reasoning

Clause 23 of Taxation Ruling TR 98/9 considers the following as self-education expenses and therefore deductible:

● Airfares to attend overseas educational institutions are deductible under section 8-1 of the ITAA 1997. They are part of the necessary cost of attending the educational institution.

● Accommodation and meals as part of travel expenses incurred in self-education activity are generally deductible under section 8-1 of the ITAA 1997. They are part of the necessary cost in attending the educational institution.

In circumstances where the taxpayer is not required to sleep away from home to attend the self-education course or training, or has travelled to another location for self-education purposes and has established a new home, expenditure on meals and accommodation will be disallowed.

If you were to complete the short course your spouse and family would not accompany on the training and you would reside in a small apartment near the training school. In this instance, your travel, accommodation and meal costs would only serve as a temporary measure for the sole purpose of attending the training course. It would be compulsory and unavoidable for you to incur travel, accommodation and meal expenses in order to attend the course in a location overseas from your family home.

Question 3

Summary

The travel, accommodation and meal expenses you incur in completing the long course are considered personal and not an expense necessarily incurred in gaining your assessable income.

Detailed reasoning

A deduction is not allowed if it can be determined that you will establish a new home in the new location. To be deductible, the accommodation needs to be shown as a temporary measure with the sole purpose of attending the course. Paragraph 93 of TR 98/9 outlines some key factors to consider when determining when a new home has been established, including:

● Duration of travel undertaken by the taxpayer

● Whether the taxpayer stays at one location or moves frequently from place to place.

● Whether the taxpayer is accompanied by his family.

● Type of accommodation in which the taxpayer resides in ie hotel, long term accommodation.

● Whether the taxpayer is maintaining a home at his/her previous location while away.

● Frequency and duration of return trips to the previous location.

You have indicated that if you were successfully accepted into the long course, you would relocate overseas with your spouse and X infant children for the duration of the course and reside together in either a furnished apartment or hotel for the duration of the XX week training. You would leave your possessions within your house located in Australia for the duration of the course of study and given the relative short duration of the course, would not rent out your house in Australia.

Given that your family will accompany you for the whole duration of the XX week training long course and you and your family will not to return to Australia for the duration of the training course, you would be considered establishing a new home. Therefore, the travel, accommodation and meal costs incurred by you and your family would considered an expense of a personal nature and not deductible.

Question 4

Summary

Given that both the long and short courses would allow you to advance your knowledge and skill in the performance of your current role and once completed allow you to return to your current employer, interest on a loan taken out to fund either course would be considered deductible as a self-education expense under section 8-1 of the Income Tax Assessment Act 1997.

Detailed reasoning

Interest expenses incurred by a taxpayer on monies borrowed to pay for self-education expenses is allowable under section 8-1 where the interest expense has a relevant connection with the activities by which a taxpayer derives his assessable income. Connection is shown where the interest expense relates to funds borrowed and used to pay self-education expenses associated with a course of education that enables a taxpayer to maintain or improve their skill or knowledge or is likely to lead to an increase in income from their current income earning activity.

Question 5

Summary

Incidental costs such as text books, journals and electronic equipment used to complete the long or short course are depreciable items which can be considered self-education expenses based on the proportion to which they are used to complete the long or short course.

Detailed reasoning

If the subject of self-education enables you to maintain or improve skills or knowledge or is likely to lead to an increase in income from your current income earning activities, you can deduct an amount for the reduced value of a depreciating asset you use or have installed for use for self-education purposes.

For small item depreciating assets less than $300 in value that meets the conditions within section 40-80(2) ITAA 1997, you can deduct the cost of the depreciating asset in the year you started using it.

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).