Edited version of private ruling

Authorisation Number: 1011528207111

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Ruling

Subject: Deduction for self education expenses

Self education

Question

Are you entitled to a deduction for self education expenses?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts

You are employed in a particular field.

You currently have a bachelor degree.

You are undertaking a Masters degree in the same field.

You have incurred expenses for course fees, travel, accommodation, meals while away from home for study, books and internet expenses.

You have retained evidence for only some of the expenses.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-15

Reasons for decision

Summary

Your self education expenses for course fees, travel, accommodation, meals while away from home for study, books and internet expenses are deductible provided you can substantiate your claim.

Detailed reasons

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 discusses the circumstances under which self education expenses are allowable as a deduction. 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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

Similarly, 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, a deduction is allowable.

The following types of expenses related to self education are allowable:

- course or tuition fees;

- the cost of professional and trade journals, text books and stationery;

- airfares incurred for attending an educational institution.

- where you are away from home overnight, accommodation and meals expenses incurred on attending an educational institution; and

- internet expenses.

In your case, it is accepted that the degree will maintain or enhance the skills that are required in the performance of your current employment duties. Consequently the self education expenses incurred have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997.

However, although self education expenses are allowable they must also meet the substantiation provisions which are outlined in Division 900 of Part 5-30 of the ITAA 1997. Substantiation means that although you may have fulfilled the technical requirements for deductibility (such as the expense being incurred in producing assessable income) the deduction will be denied unless you can prove that the relevant expenditure was incurred in the manner required under the substantiation provisions.

Documentation substantiating your allowable expenses should be retained for five years from the due date for lodging the income tax return for the income year the expenditure was incurred or, if a return lodged later, the date the return is lodged.