Edited version of private ruling

Authorisation Number: 1011833018784

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Ruling

Subject: Self-education expenses

Question

Are the self-education expenses you incurred allowable as a deduction?

Answer

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 commenced employment with a state authority full time.

You are a qualified accountant.

You were later successful in applying for the new position. In your transition from your old team your working arrangements were half and half until you started full time.

You have provided job descriptions for both positions.

You have since been selected for higher duties within the group and this in part has come about because of the study you had undertaken.

You completed a Graduate Certificate course which had subjects relating to your current income earning activity.

You undertook the course to improve your professional knowledge.

You incurred the following expenses:

· course fees

· textbooks

· allowable travel

You have financed your course fees using a FEE-HELP loan.

Your employer has reimbursed part of your costs. You have provided a copy of the reimbursement approval and your bank account statement as to when the payment was received.

You undertook your study outside of work time and attended all classes in the evenings after work for three of the four based subjects. You took annual leave to complete the fourth subject over five days.

Your study was at a university and you were required to travel by car from your home to the university and then back home after the night classes. You have provided a copy of calculation of your return trips to and from your home and university.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Summary

You are entitled to a deduction for the expenses you incurred for the Graduate Certificate as there is sufficient nexus between your income earning activities and the course of study. However, you need to reduce your claim by the amount your employer has reimbursed to you.

Detailed reasoning

Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 8-1 allows a deduction for an outgoing to the extent that it is incurred in gaining or producing assessable income, except where the outgoing is 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. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities.

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; (1961) 8 AITR 406).

Similarly, if the study of a subject of self-education objectively leads to, or is likely to lead to an increase in a taxpayer income from his or her current income earning activities in the future, a deduction is allowable.

In your case, it is accepted that the course you have undertaken will maintain or enhance the skills that are required in the performance of your current employment duties.

Consequently the self-education expenses incurred in undertaking the course have the necessary and relevant connection with the earning of your assessable income and are deductible under section 8-1 of the ITAA 1997.

You have incurred the course 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 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.

Further information

When claiming for self education expenses, you need to reduce your claim by the amount your employer has reimbursed to you.

Note

The self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR98/9, which can be assessed on our internet website at www.ato.gov.au.