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Edited version of private ruling
Authorisation Number: 1011681041493
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Ruling
Subject: Self-education expenses
Question 1
Are you entitled to claim a deduction for self-education expenses?
Answer
Yes.
Question 2
Is the deduction for self-education still allowable where the course fees are paid using a full-fee paying students Higher Education Loan Programme (FEE-HELP) loan?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009
Year ended 30 June 2010
Year ending 30 June 2011
The scheme commenced on:
1 February 2007
Relevant facts and circumstances
You are a contractor working for a state government department.
You are responsible for the management and delivery of new products and services.
You are currently undertaking a postgraduate degree.
You have incurred and will be incurring course fee expenses using a FEE-HELP loan.
You are not required to undertake postgraduate studies by your employer but there are expectations to maintain your credentials within the industry that you are in.
You have not received any allowances or reimbursements for expenses you have incurred in relation to your postgraduate studies.
You intend to stay with the department after completion of the course.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1 and
Income Tax Assessment Act 1997 Section 26-20.
Reasons for decision
Summary
You are entitled to claim a deduction for self-education expenses when undertaking your postgraduate studies as the course directly relates to your current income-earning activities.
The eligible self-education expenses include the amount of course fees incurred or you may incur in the future under FEE-HELP.
Detailed reasoning
Self-education expenses
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.
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.
In your case, it is accepted that the postgraduate 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.
FEE-HELP
You have incurred the course fee expenses through FEE-HELP which was introduced by the Commonwealth to provide assistance to students who are not supported by the Commonwealth to pay course fees. As you have met the requirements for eligibility for a deduction for self-education expenses, the whole course fee is deductible. However, you are not allowed a deduction under section 26-20 of the ITAA 1997 for the repayment of FEE-HELP debt.
Limit to the deductibility of self-education expenses
In certain circumstances you may have to reduce your allowable self-education expenses by $250. However you may have other types of expenses some of which are not allowable as a deduction that can be offset against the $250 before you reduce the amount you can claim for allowable expenses. Further information on how to work out your self-education expenses is provided in TaxPack 2010 (NAT 0976) and paragraphs 119 to 155 of TR 98/9. This publication and ruling can be accessed by visiting our website.