Edited version of private ruling

Authorisation Number: 1011922974591

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Ruling

Subject: Deduction-self-education

Question 1:

Are you entitled to claim a deduction for your airfares to travel overseas to undertake a course?

Answer: Yes

Question 2:

Are you entitled to claim a deduction for excess baggage while travelling overseas to undertake a course?

Answer: No.

Question 3:

Are you entitled to claim a deduction for your living expenses while undertaking the course in countries A and B?

Answer: No.

Question 4:

Are you entitled to claim a deduction for travel expenses between your accommodation and an education facility while studying in country A?

Answer: No.

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts

You are employed with a business.

You have a number of duties you undertake with your employer.

You and your employer entered into an agreement.

Under the terms of the agreement your employer would provide a number of benefits in relation to the course.

The agreement also provided that upon your return to Australia you would commit to returning to your current employment for a number of years.

You were placed on leave of absence with your employer.

Your reasons for undertaking the course were to improve your knowledge and enhance your skills and to increase your income for your current employment.

You rented out your main residence during the period you were studying overseas.

You and your partner travelled overseas together.

You and your partner lived in rented accommodation in country A.

You travelled from your rented accommodation in country A to attend an education facility to undertake part of the course.

You were in country A for a number of months.

You and your partner then travelled to country B.

In country B, you and your partner also lived in rented accommodation.

You did not undertake any employment in countries A or B while undertaking the course.

You did not take annual leave while undertaking the course.

You re-commenced your employment with your employer when you came back to Australia and received an increase in your income.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1. 

Reason 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, 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.

However, the self-education expenses will not be deductible if the study is to enable you to open up a new profession or occupation.

In your case, you were on leave from your employer while undertaking a course overseas. It is accepted that this course has maintained and enhanced the skills that are required in the performance of your employment activities with your employer and on completion of the course lead to an increase in your income in your current employment activities.

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 expense 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 that a deduction for accommodation, meals and travel 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

TR 98/9 provides that airfares incurred on overseas study tours or sabbatical, on work related conferences or seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution.

In your case, you were required to travel to countries A and B to study for the course. These airfares are considered part of the necessary costs of attending the educational institution. A relevant connection has been established between the course you have undertaken and your income-earning activities. Accordingly, a deduction is allowable for your airfares in relation to your trip to countries A and B under section 8-1 of the ITAA 1997.

Excess Baggage

Expenses incurred in regards to excess baggage are private in nature as they generally cover items of a personal nature and are not deductible under section 8-1 of the ITAA 1997.

Accommodation, food, council rates and utility expenses

TR 98/9 considers occasions where accommodation expenses may have the essential character of an income-producing expense where the expenditure is incurred while away from home overnight in connection with a self-education activity, the accommodation expenses incurred may be deductible under section 8-1 of the ITAA 1997.

However, where a taxpayer is away for an extended period of time and has established a new home, the cost of accommodation and meals remain private in nature and are not deductible under section 8-1 of the ITAA 1997.

TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established. They include:

· the total duration of the travel

· whether the taxpayer stays in one place or moves frequently from place to place

· the nature of the accommodation (hotel, motel, long term accommodation)

· whether the taxpayer is accompanied by his or her family

· whether the taxpayer is maintaining a home at the previous location while away, and

· the frequency and duration of return trips to the previous location.

You undertook a course overseas at education facilities in countries A and B. You and your partner left Australia for an extended period of time.

You incurred costs for your rented accommodation and you also incurred other expenses consistent with a person living in a home.

You and your partner leased accommodation in country A for a long period of time and you remained in this location to study until you travelled to country B. You arrived and stayed in leased accommodation in country B to continue your studies for a further extended period of time before returning to Australia.

You rented out your home in Australia during the period you studies and you did not return to your home in Australia during this time.  

These factors all lend weight to the conclusion that you established a new home in countries A and B during the period you had undertaken the course.

Therefore, you are not entitled to a deduction under section 8-1 of the ITAA 1997 for the cost of the living expenses you incurred in countries A and B as the living expenses are of a private or domestic nature.

Travel expenses between home and the education facility

A deduction is generally not allowable for the cost of travel by an employee between home and their normal workplace as it is considered to be a private expense (Lunney v. Federal Commissioner of Taxation (1957-1958) 81 ATC 186 ALR 225; 1958). The cost of travel between home and work is generally incurred to put the employee in a position to perform duties of employment, rather than in the performance of those duties.

TR 98/9 deals with the deductibility of self-education expenses and is an updated version of Taxation Ruling TR 92/8 which was withdrawn in 1998. However, principles covered in paragraphs 11(d), 13(c) 43 and 44 of TR 92/8 relating to motor vehicle and travel expenses still apply.

Paragraph 13(c) of TR 92/8 states that motor vehicle expenses between a taxpayer's home and an educational institution where the taxpayer carried out income-earning activities at the institution are not an allowable deduction. If a taxpayer travels from their home to an educational institution and then to his or her place of work and returns home by the same route, only the costs of the journeys between the institution and the place of work are allowable.

In Case U45 87 ATC 320, the Administrative Appeals Tribunal (AAT) was of the view that, in determining whether self-education expenses are allowable, an educational institution is considered to be a place of work. Accordingly, deductions were not allowed for the costs of travelling between the taxpayer's home and the institution.

You have set up a new home in country A. You were in receipt of income to undertake the course. Your studies were undertaken at the education facility in country A. Therefore, it is considered that the education facility is your normal place where your income-producing activity is undertaken and any travel from your home in country A to attend the education facility to undertake your studies is considered private in nature. Therefore, a deduction is not allowable for your travel expenses under section 8-1 of the ITAA 1997.