Edited version of private ruling

Authorisation Number: 1011788730100

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Ruling

Subject: self-education expenses

Questions and answers

1. Are you entitled to a deduction for self-education expenses associated with your course as a work-related expense?

No

2. Are you entitled to a deduction for self-education expenses associated with your course as a business expense?

Yes

3. Are you entitled to claim the relevant GST component of the self-education expenses associated with your business?

Yes

4. Are you entitled to a deduction for the course fee that was paid for by using FEE-HELP assistance?

Yes

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are a full-time employee.

You carry on a business which is registered for Good and Services Tax (GST).

You are currently undertaking a course at a tertiary institution. This course is run out of a particular faculty of the tertiary institution through a specific unit dedicated to education relating to your particular business.

This qualification is one of the first in the world and consists of four subjects. Two subjects are compulsory subjects and you are also required to select two elective units of study. You provided details of all the subjects

All units of study are subjects related to your particular type of business.

You do not have any other formal qualifications relating to your business. No formal qualifications are required for this type of business.

You have a number of years of experience in various areas of the public sector which you use in your business.

In 2010, you were a member of some organisations related to your business.

The awarding of the qualification for this course will assist in you gaining creditability in the industry and enable you to inject your learning directly into your business activities.

You are registered for GST.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

New Tax System (Goods and Services Tax) Act 1999 section 11-5

New Tax System (Goods and Services Tax) Act 1999 subsection 11-15(1)

New Tax System (Goods and Services Tax) Act 1999 section 11-20

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 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.

Taxation ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. As most self-education expenses are voluntarily incurred to produce assessable income, expenses of self-education are deductible under the first limb of section 8-1 of the ITAA 1997, including those related to the carrying on of a business.

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.

In your case, you are undertaking a self-education course and the subjects in the course relate to your business. You derive income from this business which is declared in your income tax return. As the course relates to your business activities and not your activities as an employee, it is deductible as a business expense.

GST

Section 11-20 of a New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that you are entitled to the input tax credits for any creditable acquisition that you make.

The expression 'creditable acquisition' is defined in section 11-5 of the GST Act. You make a creditable acquisition if:

(a) you acquire anything solely or partly for a creditable purpose

(b) the supply of the thing to you is a taxable supply; and

(c) you provide, or are liable to provide, consideration for the supply; and

(d) you are registered or required to be registered.

In your case, you have satisfied the conditions in section 11-5 of the GST Act because of the following:

· you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise (subsection 11-15(1) of the GST Act). The term 'enterprise' includes an activity or series of activities in the form of a business (paragraph 9-20(1)(a) of the GST Act)

· the supply of the self-education course was a taxable supply to you

· you supplied consideration for the self-education course

· you are registered for GST

In your case, we have accepted that you are carrying on a business. It follows that you also acquired your self-education course for a creditable purpose because you acquired it in carrying on your enterprise. Therefore, you are entitled to the input tax credits for the expenses incurred in undertaking the course.

You can not claim a deduction for the GST you pay in the price of something you purchased if you are entitled to claim it as a GST credit on your activity statement.

FEE-HELP

FEE-HELP is a loan for eligible fee-paying students enrolled at an eligible higher education provider and provides assistance to students to pay tuition fees.

If the student meets the requirements for eligibility for a deduction for self-education expenses, the student is not prevented from claiming a deduction for that portion of the tuition fees paid using FEE-HELP. The tuition fee is tax deductible in the year the expense is incurred, that is, the year in which the study is undertaken. Payments made to reduce a FEE-HELP debt are not deductible.

In your case, you have obtained FEE-HELP assistance for the payment of the course fee for one of the subjects in your course. As the course is related to your business, the expense for the course fee using the FEE-HELP assistance is allowed as a deduction (Paragraph 85 TR 98/9).