Edited version of private advice

Authorisation Number: 1051992163411

Date of advice: 13 July 2022

Ruling

Subject: Self education expenses

Question 1

Are you entitled to a self-education deduction for airfares to and from Country Z and Country Y to undertake a study tour?

Answer

Yes.

Question 2

Are you entitled to a self-education deduction for domestic airfares in relation to the study tour?

Answer

Yes.

Question 3

Are you entitled to a self-education deduction for accommodation and meals while you are on the study tour?

Answer

Yes.However, you cannot claim a deduction for any food and accommodation expenses during any period of private travel before, after or during the study tour.

Question 4

Are you entitled to a self-education deduction for leasing a car and other transport expenses while you are on the study tour?

Answer

Yes.However, you cannot claim a deduction for any transport expenses to the extent they relate to any period of private travel before, after or during the study tour.

Question 5

Are you entitled to a self-education deduction for the costs associated with your mobile phone and internet while overseas on the study tour?

Answer

Yes.However, you must apportion your deduction to account for any private use of your phone and internet.

Question 6

Are you entitled to a self-education deduction for the costs associated with travel insurance?

Answer

No.

Question 7

Are you entitled to a self-education deduction for the costs associated with translation services?

Answer

Yes.

Question 8

Are you entitled to a self-education deduction for the costs associated with offshore weather clothing and footwear?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You work as a manager.

Your contract ends in a couple of years.

You intend to undertake a self-funded study tour in Country Z and Country Y.

Your role as manager is the first in your particular field in Australia, as is the development of the projects more broadly.

You have the opportunity to work with overseas governments to develop a detailed study tour within Country Z and also Country Y.

While the employer is supportive of a study tour, there is currently no budget allocation available for this.

You have provided a letter from your employer indicating their support of such a trip.

Such a study tour would increase your knowledge and experience and your earning capacity in the future.

You are proposing to undertake this study tour later in the year for a few weeks.

You intend to add a number of extra days to the trip for tourist purposes and you understand expenses incurred in this period would not be deductible.

Professional benefits of the trip:

•         Enhanced knowledge of various technologies

•         Increased skills in engagement with stakeholders as you will have a greater understanding and more contemporary experience of your field

•         It will assist in your role in the planning and engagement of your field in Australia

•         Your enhanced knowledge will enable you to share your knowledge and contribute more to the team

•         Ability to hear and report back to your team about emerging technology and how it can be integrated into the Australian sector

The opportunity to obtain relevant experience overseas was first mooted with the Country Y authority during one of your early meetings with them, of which your former manager was aware.

You understand they have extended the invitation to others within the industry, including a colleague of yours.

You wish to claim the following as a deduction:

•         Travel insurance

•         Airport transfers - home to airport and back

•         All flights - international and internal

•         Accommodation

•         Accommodation transfers

•         Transport costs (car rental)

•         Meal expenses and incidentals

•         Phone and internet costs

•         Protective clothing and footwear

•         Equipment - weatherproof backpack

•         Translator services, if necessary

•         Appropriate footwear

Relevant legislative provisions

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 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, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist.

You are going overseas to undertake a study tour.

This study tour will enable you to gather information to use as part of your current role as a manager.

The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current position as a manager and the study tour.

Accordingly, you are entitled to a deduction for the costs associated with your study tour.

The airfares to and from the study tour including all domestic air travel is an allowable deduction.

Your accommodation and meals while on the study tour are an allowable deduction.

Car rental and other travel while on the study tour is an allowable deduction.

The costs associated with your mobile phone and internet are deductible to the extent they relate to the study tour.

The costs associated with travel insurance are considered to be private in nature.

Travel insurance policies invariably cover items that are generally private in nature. For example, illness, loss of baggage and theft or damage to belongings.

The travel insurance is therefore not deductible.

The translation service is deductible to the extent it is used in directly acquiring knowledge and information from the study tour.

In general terms, all expenses will only be deductible to the extent they relate to your study tour. You do not need to apportion your airfares as the predominant purpose of your trip is a study tour, and the small amount of private travel you intend to undertake after the tour is only incidental to the study tour. However, you cannot claim expenses of food, accommodation and travel during this period. Expenses such as internet, mobile phone and translator services can only be claimed to the extent they relate to the study tour.

Section 900-20 of the ITAA 1997 requires you to keep a travel record if you claim an expense for travel that involves being away from your residence for six or more consecutive nights. Section 900-150 tells you how to keep a travel record. Your travel record (such as a diary or similar document) must record work-related activities by specifying:

(a)         the nature of the activity;

(b)         the day and approximate time it began;

(c)         how long it lasted;

(d)         where you engaged in it

You should record the activity before it ends, or as soon as possible afterwards.

Clothing

Taxation Ruling TR 97/12 Income tax and fringe benefits tax: work related expenses: deductibility of expenses on clothing, uniform, and footwear (Taxation Ruling TR 97/12), discusses the Commissioner's view on the deductibility of work-related clothing, uniform, and footwear expenses. This taxation ruling applies to individuals who are employees or in receipt of withholding payments.

Taxation Ruling TR 97/12 provides that the cost of buying clothing will in most circumstances, be regarded as an expense of a private nature. Clothing is necessary for protection of the body from the elements and to meet societal norms of modesty, fashion, or similar conditions.

For expenditure to be deductible, the expenditure must have the essential character of an outgoing incurred in gaining assessable income. It is not sufficient that the expenditure is a prerequisite to the derivation of assessable income; it must contribute to the derivation of that income

The circumstances where expenditure for clothing is considered to be deductible are where the clothing is:

(a) protective clothing and footwear - refer to Taxation Ruling TR 2003/16 Income tax: deductibility of protective items that specifically addresses the claiming of protective clothing and footwear as a deduction.

(b) occupation specific clothing - refers to clothing that distinctively identifies the wearer as a person associated with a particular profession, trade, vocation, occupation or calling. It is this distinctive nature of the clothing that provides a connection between the expenditure and the income earning activities;

(c) a compulsory uniform/wardrobe and meet the requirements of Taxation Ruling IT 2641;

(d) a non-compulsory uniform/wardrobe - a deduction is only allowable for a non-compulsory uniform/wardrobe where the design of the uniform/wardrobe has been entered on the Register of Approved Occupational Clothing

The clothing, footwear and backpack are not an allowable deduction as in most cases they will not meet the above requirements. Furthermore, those items that may have some protective qualities are too remote from the earning of your assessable income to satisfy the requirements of contributing to the derivation of that income.

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