Edited version of private advice

Authorisation Number: 1052047284060

Date of advice: 26 October 2022

Ruling

Subject: Self education expenses

Question 1

Is your travel to Town A deductible under paragraph 8-1(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) as a work-related self-education expense?

Answer

No.

Question 2

Is your travel to Town A deductible under paragraph 8-1(1)(b) of the ITAA 1997?

Answer

No.

Question 3

Is your travel between Town A and Town B to attend education days deductible under section 8-1 of the Income ITAA 1997?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You completed an undergraduate degree.

You are employed by a State Government Department.

Your employment offer stipulates that your work location is Town A, but you may be required to undertake work anywhere within the regional area.

You have not undertaken any work shifts in Town B.

You are currently undertaking further study.

The study is not a mandatory requirement of your role, but is provided by your employer.

A condition of the program of study is that you work remotely in Town A and undertake additional training days in Town B.

You do not attend an institution of learning - all learning is completed within the regional area in the Town A or Town B workplaces.

You undertake some learning during unpaid hours as you are required to complete self-paced learning packages.

You are not paid for your travel, but you are paid your regular salary on education days.

The program provides you with recognised credit points for further education.

You operate a business as a sole trader.

Your undergraduate course is required to be qualified in providing the services your business offers.

You believe the knowledge and critical thinking skills gained from the course will benefit the business in many ways by enabling you to add a new service, better manage your clients and grow the business.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Is your travel to Town A deductible under paragraph 8-1(1)(a) of the Income Tax Assessment Act 1997 (ITAA 1997) as a work-related self-education expense?

Answer

No.

Question 2

Is your travel to Town A deductible under paragraph 8-1(1)(b) of the ITAA 1997?

Answer

No.

Detailed reasoning

Subsection 8-1(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 or necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income. Subsection 8-1(2) of the ITAA 1997, however, prevents a deduction 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. 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; 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.

Therefore, to claim a self-education deduction there must be a sufficient connection between your course of self-education and your current income earning activities.

In your case, while there may be a sufficient connection between your course and your income earning activities (employment with a State Government Department and operation of your business), your study is carried out at your State Government Department workplace and the travel is between your home location and your regular place of work location.

Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? explains when an employee can deduct the cost of travel under section 8-1 of the ITAA 1997.

With limited exceptions, an employee's costs of travelling between home and a regular place of work are not deductible. Such costs are not incurred in the course of gaining or producing an employee's assessable income. This expenditure is regarded as a prerequisite to earning an employee's assessable income. They are explained by where the employee lives in relation to where they report for work. Further, transport expenses incurred in travelling between an employee's home and their regular place of employment are private in nature.

An employee cannot deduct travel expenses they have incurred where, due to their personal circumstances, they live far away from where they gain or produce their assessable income. These expenses are living expenses and are not deductible.

In your case, the expenses have been incurred because of your personal circumstances where you choose to keep your usual residence, rather than relocate. The occasion of the expenses are not found in your income-producing activities, meaning that these expenses are not incurred in the course of gaining or producing assessable income. They are private and domestic in nature.

Question 3

Is your travel between Town A and Town B to attend education days deductible under section 8-1 of the ITAA 1997?

Answer

Yes.

Detailed reasoning

Subsection 8-1(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. 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; 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.

Therefore, to claim a self-education deduction there must be a sufficient connection between your course of self-education and your current income earning activities.

In your case, while there may be a sufficient connection between your course and your income earning activities (employment with a State Government Department and operation of your business), you are paid by your employer to attend education days in Town B at an alternative State Government Department workplace and it is considered that you are travelling to an alternative work location as opposed to a place of education.

Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses? explains when an employee can deduct the cost of travel under section 8-1 of the ITAA 1997.

Expenses of travelling between work locations are ordinarily deductible provided the employment is the occasion of the expenses. In your case travel between Town A and Town B is to undertake education and training sanctioned by your employer and related to your employment. You are entitled to claim a deduction for the cost of travel from Town A to Town B on education days.

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