Edited version of private advice

Authorisation Number: 1052323527317

Date of advice: 1 November 2024

Ruling

Subject: Self-education expenses

Question 1

Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for the cost of tuition fees, textbooks, stationery and printing / photocopying expenses and a laptop incurred in undertaking the course.

Answer

Yes.

Question 2

Are you entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of airfares and accommodation incurred in undertaking the course?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2024

Year ended 30 June 2025

The scheme commenced on:

11 June 2024

Relevant facts and circumstances

You have been admitted into Bachelor of Civil Law.

The Bachelor of Civil Law commenced on XX X 20XX.

You are undertaking a number of subjects.

The subjects will enable you to improve your skill and knowledge in the field of civil dispute resolution.

You have a part tuition joint scholarship.

You were invoiced for the balance of the tuition fees.

You paid the balance of the tuition fees.

You are required to reside at the university as a condition of your offer of enrolment.

You incurred airfares to travel to undertake the course.

You are incurring accommodation costs.

You purchased a personal study laptop.

You anticipate incurring costs for textbooks and stationery.

You have been employed at a law firm in various roles.

You have taken a leave of absence throughout the duration of course.

You have provided a letter of support to undertake the course from your employer.

The letter also states it is anticipated you will have a place to return to work at the firm.

You are undertaking the Bachelor of Civil Law with the expectation that your salary with the firm will increase, however, any such decision is at the discretion of the firm.

You completed the Bar Practice Course.

You signed a readership agreement with a barrister's chambers.

The readership agreement with the barrister chambers notes the start date is flexible and you will notify the barrister's chambers of the start date in due course.

You have not notified the chambers of a particular start date.

You intend to become admitted as a barrister.

Unless you take further steps your completion of the Bar Practice Course will lapse.

These further steps include resigning from your employment as a solicitor and cancelling your solicitor practicing certificate.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Detailed reasoning

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 2024/3 Income tax: deductibility of self-education expenses incurred by an individual discusses circumstances in which self-education expenses are allowable. A deduction is allowable for self-education expenses if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of the self-education enables the taxpayer to maintain or improve that skill or knowledge.

Paragraphs 13 to 16 of the TR 2024/3 state:

13. To be deductible under section 8-1, expenditure must be able to be characterised as having been incurred in gaining or producing assessable income.

14. 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.

15. This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce your assessable income, or if none is produced, would be expected to produce your assessable income.

16. It is not enough to show only that there is some perceived connection, general link or causal connection between the expenditure and the production of your income. The expenditure must have a close connection to the performance of the duties and activities through which you earn your income.

The question of what produces your assessable income should not be approached narrowly. It requires consideration of the tasks to be performed and the duties to be observed (referred to as your income-earning activities) (paragraph 17 of TR 2024/3).

The reason or motive for undertaking the self-education is not determinative of whether the expense is incurred in gaining or producing your assessable income: In many, if not most, cases the objective relationship between an expenditure and that which is productive of income will provide a sufficient answer to the inquiry posed by [section 8-1] (paragraph 18 of TR 2024/3).

Paragraph 22 of TR 2024/3 provides that self-education expenses are incurred in gaining or producing your assessable income if either or both of the following apply:

•         Your income-earning activities are based on the exercise of a skill, or some specific knowledge and the self-education enables you to maintain or improve that skill or knowledge. (Principle 1)

•         The self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future. (Principle 2)

To be able to claim a deduction, the expenses must relate to your income earning activities at the time of incurring the expense (paragraph 72 of TR 2024/3). In determining whether a deduction is allowable for self-education expenses there would need to be an examination of how the course is connected to your income earning activities at the time the expenses were incurred.

Application to your circumstances

To determine whether circumstances exist that support your self-education deductions, it is necessary to determine whether there is a sufficient connection between you incurring the expense and your current income earning activities. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

In your case, it is accepted that the course will maintain or enhance the skills that are required in the performance of your current employment duties as a solicitor. You have provided a letter of from your employer that supports you undertaking the course and states that following your unpaid leave of absence to undertake the course you will be able to return to your position in the firm. This letter of support also confirms the course is relevant to your ongoing practice as a solicitor.

Tuition fees

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states:

98. Course fees to attend a university or approved higher education provider are deductible only where you are enrolled in a full fee-paying place (where the government does not pay any part of your fees).

In your case, it is accepted that the course maintains or enhances the skills that are required in the performance of your employment as a solicitor. You are therefore entitled to a deduction for your self-funded portion of the tuition fees under section 8-1 of the ITAA 1997.

Textbooks and stationery

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states:

119. Self-education expenses incurred for professional and trade journals, digital subscriptions and stationery, including pens and photocopying are deductible.

120. Reference books and textbooks that you use for self-education are generally deductible. Where the books, or sets of books, cost more than $300, you deduct an amount for decline in value instead of claiming a deduction in the year of purchase.

You can deduct the cost of the books under section 8-1 of the ITAA 1997. Where the books, or sets of books, cost more than $300, you can deduct an amount for the decline in value of the books under section 40-25 of the ITAA 1997 instead of claiming a deduction in the year of purchase.

Decline in value (depreciation)

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states:

159. If the subject of the self-education enables you to maintain or improve skills or knowledge or is likely to lead to an increase in income from your current income-earning activity, you can deduct an amount for the decline in value of the depreciating asset you use, or have installed ready for use, for self-education purposes. For example, you can deduct an amount for the decline in value of assets such as technical instruments and equipment, computers, calculators, professional libraries, filing cabinets and desks if the self-education satisfies the principles outlined in paragraph 22 of this Ruling.

160. An asset starts to decline in value when you first use or install it for any use, including a private purpose.

161. You must reduce your deduction by the extent to which you use the asset for other than a taxable purpose or if you held it for only part of an income year. For example, if you use the asset 30% for private purposes and 70% for taxable purposes in an income year, you reduce your deduction by 30%.

162. The deduction you can claim for the decline in value of a depreciating asset used for self-education will be determined by the:

•         cost of the asset

•         effective life of the asset

•         method you use to calculate the decline in value.

In your case, you purchased a laptop computer primarily for the purpose of your studies, and you can deduct an amount for the decline in value. Although only the study related usage proportion may be claimed.

Airfares

The deductibility of airfares is dependent upon the reason the expenses were incurred.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states:

125. Airfares incurred to participate in self-education, provided you are not living at the location of the self-education activity, are deductible.

Airfares are deductible when the expense is incurred to participate in a course of self-education which is related to your income producing activities. However, if you move to a new place to live while undertaking a course of self-education, the nature of the airfares becomes private and personal as the nexus between the airfare and your earning of assessable income is severed. You are not entitled to a deduction for the cost of your airfares under section 8-1 of the ITAA 1997.

Accommodation

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states:

130. Similarly, accommodation and meal expenses you incur in connection with self-education will be private and domestic living expenses where you are living at the location of the self-education activity. This will apply regardless 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 income-earning activities.

131. The following factors indicate when your accommodation and meal expenses are private and domestic living expenses, and are not 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.

132. No single factor is decisive and the weight given to each of these factors will vary depending on your individual circumstances.

The length of the overall period you will live at the university is relatively long. The long-term nature of the accommodation is such that it could be considered your usually residence. Therefore, accommodation expenses incurred over the duration you are completing the course are not deductible under section 8-1 of the ITAA 1997 as the accommodation expenses are private and domestic in nature.

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