Edited version of private advice

Authorisation Number: 1051633687983

Date of advice: 12 February 2020

Ruling

Subject: Self- education expenses

Question

Are the tuition fees for the course you will be undertaking deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are employed as a client manager.

You will commence your studies in early 20XX.

You work in the in an area where your key duties were:

a)    As a relationship manager you are responsible for some large corporate clients;

b)    Leading the strategy for existing clients and facilitating outcomes for clients when they seek advice;

c)    Reviewing accounts and providing information to clients;

d)    Leadership responsibilities to lead staff; and

e)    Negotiate with both internal and external stakeholders and clients.

Your role in the division primarily comprised the following:

a)    Advising clients on financial decisions;

b)    Reviewing and interpreting financial accounts, providing information to clients to make decisions on their finance matters;

c)    Lead staff and the division as a; and

d)    Providing general advice to clients on their financial matters.

In 20XX you applied for an enrolment in the program. You were made an offer and your place was confirmed in mid-20XX.

The course is a postgraduate business administration course intended to be suitable for those who are ambitious managers, looking for greater responsibility and seniority or those considering enhancing their executive capabilities.

This course will take place from early 20XX to 20XX.

You will undertake a number of course modules to complete the course.

The purpose of undertaking your course is that it is directly relevant to your current employment and will likely increase your salary and your future opportunities within the organisation. It would further help you develop your skills and knowledge relevant to your role.

You will be supported by your employer for study and exam leave for the period of your study.

Your employer has contributed towards your study. The remainder will be paid/financed by you.

You will return to this employer once you have completed the course.

The total cost of the course includes full tuition fees, class materials, and residential accommodation for the duration of the program, meals on class days and the institutions fees.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1936 section 82KZM

Income Tax Assessment Act 1936 subsection 82KZM(1)

Reasons for decision

Detailed reasoning

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, 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 discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

In addition, 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, the self-education expenses are allowable as a deduction.

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

Prepaid expenses

Section 82KZM of the Income Tax Assessment Act 1936 (ITAA 1936) contains the rules which affect the timing of deductions for certain prepaid expenses. The effect of section 82KZM of the ITAA 1936 is to evenly spread the deduction for prepaid expenses over the years comprising the eligible service period.

If an individual incurs relevant expenditure not in carrying a business and the eligible service period is:

·  Longer than 12 months

·  Is shorter than 12 months but ends after the last day of the year of income after the one in which the expenditure was incurred.

then the deduction can be apportioned over the years of the eligible service period.

Application to your circumstances

In your case it is accepted that the post graduate study has sufficient nexus to your income earning activities. Therefore, the expenses incurred for tuition fees paid are an allowable deduction under section 8-1 of the ITAA 1997.

You may need to apportion over the years under the prepayment rules as the eligible service period is longer than 12 months and ends after the last day of the income year after the one in which the expenditure was incurred.

Limitation on deductibility of expenses

Section 82A of the ITAA 1936operates to limit the amount of self-education expenses otherwise allowable under section 8-1 of the ITAA 1997. Only the excess of the self-education expenses over $250 may be considered for deduction under section 8-1.

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