Edited version of private advice

Authorisation Number: 1051831915248

Date of advice: 12 May 2021

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self-education expenses incurred in undertaking your degree?

Answer

Yes

This ruling applies for the following period periods:

Year ended 30 June 2019

Year ended 30 June 2020

Year ending 30 June 2021

Year ending 30 June 2022

The scheme commences on:

1 July 2018

Relevant facts and circumstances

You are enrolled at a University for your degree.

The course is 4 years in duration when completed part-time.

You commenced the course in January 20xx on an Australian Commonwealth Supported Place (CSP) and receiving Commonwealth Assistance in the form of FEE - HELP.

Based on your current enrolment, you will complete the course in December 20yy.

You are required to complete compulsory core units and elective units

You have completed some units.

At the time of commencing the course, you were employed with employer A.

You are currently employed part-time with employer B.

You are undertaking the course as a means of increasing your skills, capability and income in your chosen professional field.

Upon completion of the study, you hope to be promoted into a more senior position with employer B and lead to an increase in pay.

You incur expenditure for textbooks, stationary, cost of car parking at University and student services and amenities fees in relation to your studies.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 82A

Income Tax Assessment Act 1997 section 8-1

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.

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. Self-education expenses are deductible where:

•         the taxpayer's income-earning activities are based on the exercise of a skill or specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge, or

•         the study of the subject of self-education objectively leads to, or is likely to lead to, an increase in the taxpayers' income from their current income-earning activities in the future.

No deduction is allowable for self-education expenses if the study is:

•         to enable the taxpayer to get employment

•         to obtain new employment, or

•         to open up a new income-earning activity (whether in business or in the taxpayer's current employment).

Paragraph 41 of TR 98/9 describes the example of Barry, a trainee accountant, who is studying commerce part-time at university. He is allowed a deduction for the costs associated with the course because the course enables Barry to maintain or increase the specific knowledge required in his current position and to carry out his duties more effectively.

TR 98/9 goes on to say that if a course of study is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist meaning that no deduction for self-education expenses would be allowable under section 8-1 of the ITAA 1997.

Application to your circumstances

Your studies are directly relevant to your role and following completion of your course your remuneration will be reviewed and potentially increased based on your qualifications. It is accepted that the study meets the requirements detailed in Taxation Ruling TR 98/9 therefore you are entitled to a deduction for self-education expenses.

Further issue

Paragraph 120 of TR 98/9 explains that section 82A of the ITAA 1936 applies if:

a)    the expenses of self-education are necessarily incurred by the taxpayer for or in connection with a course of education provided by a school, college, university or other place of education; and

b)    the course is undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade, or in the course of any employment.

Section 82A of the ITAA 1936 provides that a deduction for expenses of self-education under section 8-1 of the ITAA 1997 is not to be greater than the amount by which the net amount of expenses of self-education exceeds $250.

This means that if all your expenses of self-education are deductible under section 8-1 of the ITAA 1997, the maximum deduction allowable is $250 less than the total expenses incurred. Conversely, if you have expenses of self-education which are not deductible under section 8-1 of the ITAA 1997, and such expenses exceed $250, no reduction to your claim is required. These expenses can include the cost of capital items such as computers, or the cost of car expenses worked out using the cents per kilometre rate.

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