Edited version of private ruling

Authorisation Number: 1011842974631

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Ruling

Subject: Deduction- self-education

Question 1

Are you entitled to claim a deduction for expenses incurred in undertaking a self-education course in country A?

Answer: Yes.

Question 2

Are you entitled to a deduction for your return airfare to country A while you are undertaking a self-education course?

Answer: No.

Question 3

Are you entitled to a deduction for accommodation and travel expenses when you attend the self-education course?

Answer: Yes.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011 

Relevant facts

You have a number of years of experience in your profession.

You hold a number of qualifications relating to your profession.

You are engaged as subcontract for a business to provide training courses for students.

Your reasons for undertaking the course are to update your knowledge in your field of employment and to attract more clients to your business activity.

You intend to travel to country A to undertake the course when on holiday.

You will travel alone and stay with friends while in country A.

The self education course is expected to run for a few days depending on the availability of the self education course during your holiday. However, if it does not become available during this time, you may have to return overseas at another time.

You paid course fees.

You intend to travel to the self-education course using public transport.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1
Income Tax Assessment Act 1936 Section 82A.

Reasons for decision

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.

The deductibility of your overseas travel needs to be considered under general self-education principles outlined in Taxation Ruling TR 98/9. In accordance with TR 98/9, expenses of self-education are allowable if a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self education enables the taxpayer to maintain or improve that skill or knowledge.

In your case it is accepted that the course will maintain or enhance the skills and knowledge that are required to perform your duties. Consequently, the self-education expenses incurred in undertaking the course have the necessary and relevant connection with the earning of your assessable income.

Travel, accommodation and meals expenses are generally private or domestic in nature. However, there can be instances where these expenses can relate to a work-related activity. TR 98/9 explains a deduction for accommodation, meals and travelling to a work-related self-education activity is an allowable deduction under section 8-1 of the ITAA 1997 to the extent that the expenses are incurred in gaining or producing your assessable income.

Airfares and accommodation

TR 98/9 discusses the apportionment of overseas travel expenses where there is a dual purpose for the travel. Paragraphs 65 and 66 provide the following guidance:

…there are at least two kinds of expenditure that require apportionment under section 8-1 of the ITAA 1997. The first is expenditure in respect of a matter where distinct and severable parts are devoted to gaining income and other parts are devoted to some other end. If a study tour or work-related conference or seminar was mainly devoted to a private purpose, such as having a holiday, and the gaining or producing of income was merely incidental to the private purpose, only those expenses directly attributable to the income-earning purpose would be allowable.

The second kind of apportionable expenditure is a single outlay that serves both an income-earning purpose and some other purpose indifferently. While the High Court recognised that there can be no precise arithmetical division in such cases, it said there must be some fair and reasonable division on the facts of each case. For example, if a study tour or work-related conference or seminar is undertaken equally for income-earning purposes and private purposes, it would be appropriate to apportion the expenses equally between the purposes.

For example, when a ten day trip contains a five day work-related seminar and the remaining five days are spent touring and other private pursuits, it is reasonable to apportion the expenses equally between these purposes.

The above example shows situations where there is a clear and substantial ratio between private and work related activities. However, TR 98/9 provides the following example at paragraph 69 where a person undertakes a holiday and then attend a work related course during the holiday:

Jenny, a doctor, was holidaying in Cairns when she became aware of a work-related seminar on the current treatment of cancer patients. The cost of the half-day seminar was $200. Jenny is able to claim a deduction for the cost of the seminar because it is directly attributable to an income-earning purpose. However, no part of her air fare to Cairns or her holiday accommodation is an allowable deduction.

In your case, you intend to stay in country A for a few months to have a holiday. You may undertake the self-education course while there if it becomes available.

As with the example noted above (paragraph 69 of TR 98/9), the purpose of your trip is private and the air fares and accommodation relating to the holiday are not deductible. However, if the course is not undertaken during the month holiday and you have to return overseas at a different time solely to undertake the course, the return airfares are deductible.

However, as it is considered that the course has the necessary connection to your income producing activity, you are entitled to a deduction for travel between your accommodation and the course, meals and accommodation for the duration of the course.

Additional Information

Please refer to paragraph 23 of TR 98/9 for other types of self education expenses that are allowable. 

Record keeping

You must be able to substantiate your claims for deductions with written evidence if the total amount of deductions you are claiming is greater than $300. The records you keep must prove the total amount, not just the amount over $300.

If the total amount you are claiming is $300 or less, you need to be able to show how you worked out your claims, but you do not need written evidence. More information on written evidence is available at the Australian Taxation Office's website: www.ato.gov.au

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 TR 98/9, which can be accessed on the Australian Taxation Office's website.