Edited version of private advice

Authorisation Number: 1052240530307

Date of advice: 15 April 2024

Ruling

Subject: Deductions - self-education

Question 1

Are you entitled to claim a deduction for the course you completed at the overseas University under section 8-1 of the Income Tax Assessment Act 1997?

Answer

Yes - it is accepted that the course meets the requirements detailed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual which states self-education expenses are deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) as they have a relevant connection to the taxpayer's current income-earning activities.

Question 2

Are you entitled to claim a deduction for the flight, meal, and student accommodation expenses, incurred in association with the course you completed at the overseas University under section 8-1 of theITAA 1997?

Answer

Yes - it is accepted that the flight, meal, and student accommodation expenses incurred meet the requirements under section 8-1 of the ITAA 1997as they have a relevant connection to the taxpayer's current income-earning activities.

Question 3

Are you entitled to claim a deduction for the student visa fee incurred in association with the course you completed at the overseas University under section 8-1 of the ITAA 1997?

Answer

No.

This private ruling applies for the following period:

Year ending X June 20XX.

The scheme commenced on:

X July 20XX.

Relevant facts and circumstances

You obtained a bachelor's degree from an Australian university.

You have been employed at a company ('the company') in Australia since 20XX.

You are employed as an 'analyst' at the company.

The key responsibilities of this role include:

•         collaborate with senior team members to conduct thorough legal and financial due diligence for corporate transactions, including mergers and acquisitions, capital raisings and strategic partnerships

•         assist in drafting and reviewing legal documentation for various transactions, including memoranda, prospectuses and other legal agreements, ensuring accuracy and adherence to legal requirements

•         research and analyse legal issues relevant to corporate transactions, such as securities law, corporate governance and competition law

•         liaise with internal and external stakeholders, including legal advisors, clients and regulatory bodies, to facilitate transaction execution and ensure compliance with applicable regulations

•         stay abreast of changes in regulatory landscapes and industry trends related to corporate transactions, and proactively identify legal risks and opportunities for the firm and its clients, and

•         support senior team members throughout the transaction lifecycle, from deal structuring and negotiation to documentation and execution.

Your managers at the company suggested that you further develop your skills and knowledge.

You subsequently applied for a course at an overseas university.

You were successful in your application and temporarily relocated overseas in September 20XX.

You were also successful in obtaining a scholarship to attend the university.

The company have suggested that the qualification will result in an increase in income in your current role as an analyst.

You are undertaking four units at the university.

The company you work for granted you leave without pay to attend the course and retained your position for the duration of the course.

You reside at your parental home in Australia, which still contains all your belongings.

You obtained a student visa that expires following the completion of the course and only allows you to study in the country where the course is located.

The course cannot be completed online and must be attended in person.

In December 20XX, during the semester break, you returned to Australia to continue work at the company for X weeks.

You then returned back to the university in January 20XX to return to study.

Since being overseas, you have resided at the university's student accommodation under a 'licence to occupy'.

This accommodation is strictly student accommodation and you are not permitted to invite guests or share the room.

You were also not permitted to furnish the student accommodation room.

The 'licence to occupy' does not extend pass the end of the academic year, being June 20XX.

There is not an option to renew the licence to occupy.

You will be returning to your substantive role at the company at the completion of the course.

The course is scheduled to finish in June of 20XX.

The course fees totalled $X.

The scholarship you received totalled $X.

You are seeking to claim a deduction of $X.

Relevant legislative provision

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Question 1

Summary

It is accepted that the course meets the requirements detailed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual which states self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income-earning activities.

Detailed reasoning

Self-education expenses are deductible under section 8-1 if provided they are incurred in gaining or producing assessable income. It is well established that the words 'in gaining or producing assessable income' are to be understood to mean 'in the course of' gaining or producing assessable income and do not convey the meaning of outgoings incurred 'in connection with' or 'for the purpose' of deriving assessable income.

Application to your circumstances

Your employer has advised you that completing the course at the university will result in an increase to the income in your current role as an analyst. It is determined that the course you are undertaking has satisfied the requisite nexus to your income-earning activities.

For full completeness, it is noted that you are not seeking to claim a deduction for the costs incurred associated with the scholarship you received.

Question 2

Summary

It is accepted that the flight, meal, and accommodation expenses incurred meet the requirements under section 8-1 of the ITAA 1997 as they have a relevant connection to the taxpayer's current income-earning activities.

Detailed reasoning

Airfares incurred to participate in self-education are deductible, provided you are not living at the location of the self-education activity. They are deductible as they are considered to be part of the cost of undertaking the self-education activity.

As outlined in TR 2024/3,accommodation and meals you incur in connection with your self-education, are not deductible if you are considered to be 'living' at the location of the self-education activity. This is irrespective of whether the self-education allows you to acquire and improve the skills and knowledge you require to carry out your income-earning activities, or leads to, or is likely to lead to, an increase in income from your current income earning activities.

The following factors indicate whether your accommodation and meal expenses are considered private and domestic living expenses, which would not be deductible:

•         The length of the overall period you will be away from your usual residence is a relatively long one.

•         The nature of the accommodation is such that it becomes your usual residence.

•         You are, or can be, accompanied by family or friends or visited by family or friends.

Application to your circumstances

To complete the course, you have been required to temporarily re-locate overseas for less than X months. The nature of your accommodation is strictly student only accommodation, that is, you are not permitted to invite guests over, or be accompanied by family or friends. You are residing at the university's student accommodation under a 'licence to occupy', which ceases upon the completion of your course. Additionally, the student visa you obtained expires following the completion of the course and only allows you to study in the country where the course is located.

You still reside at your parental home in Australia, which still contains all your belongings. Your employer granted you leave without pay to attend the course overseas and you retained your substantive employment position with the company for the duration of the course. Based on the circumstances, you are considered to have temporarily re-located overseas and your airfares, meal, and accommodation expenses incurred during the self-education activity are deductible.

For full completeness, it should be noted that any airfare, meal, or accommodation expenses incurred during your return to Australia to work for X weeks, between December 20XX and January 20XX, are considered private in nature and are therefore not deductible.

Question 3

Reasons for decision

Section 8-1 of the ITAA 1997 allows deductions for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income. The exception to this are expenses incurred that are considered capital, private, or domestic in nature.

The courts have considered the meaning of 'incurred in gaining or producing the assessable income'.

In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'

Application to your circumstances

You were required to obtain a student visa to travel overseas at the commencement of the course. It is accepted that obtaining the visa was necessary to the self-education course, in that it enabled you to travel to the location of the course.

However, the costs incurred in association with obtaining a visa are not expenses incurred in 'gaining' or 'producing' the assessable income. The costs associated are merely pre-requisites of the course, not a cost of the actual course. The fact that you would not have needed the visa if you did not re-locate overseas is irrelevant for tax law purposes and there is an insufficient nexus for the purposes of section 8-1. The costs of any visa type is considered to be a requirement for international travel to most foreign countries and is a private expense.

It is determined that the costs associated with obtaining the student visa are not deductible under section 8-1 of the ITAA 1997.

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