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Ruling

Subject: Work related expense - self education

Question 1:

Are you entitled to a deduction for your travel expenses incurred to undertake work-related study?

Answer:

Yes

Question 2:

Are you entitled to a deduction for your meal and accommodation expenses, incurred to undertake work-related study, when you were required to stay away from home overnight?

Answer:

Yes

Question 3:

Are you entitled to a deduction for your textbook and equipment expenses incurred to undertake work-related study?

Answer:

Yes

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commences on:

01 July 2010

Relevant facts and circumstances

You are an employee.

You undertook a course related to your work as an employee.

The course was designed to maintain and improve the knowledge and skills that are required to perform your current employment duties.

Government subsidisation paid for your course fees and also some of your textbooks.

You were required to purchase some of your textbooks for the course.

You attended a training venue for some days each week.

You incurred travel expenses to attend the course.

During part of the course you were required to stay away from home overnight.

When you were required to stay away from home overnight you incurred meal and accommodation expenses, which were in addition to your travel expenses.

You were required to purchase certain equipment to undertake your course.

The cost of the equipment was less than $300.

You continued to work whilst undertaking the course.

Your employer provided you with time off and continued to pay your wages whilst you were undertaking the course.

After you complete the course you continued to work for the same employer.

Your duties have basically remained the same as before; however you now have more seniority and knowledge to impart.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 82A

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 40-25

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, or relate to the earning of exempt income.  

Taxation Ruling TR 98/9 discusses the deductibility of self-education expenses and provides that where your income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables you to maintain or improve that skill or knowledge, the self-education expenses are an allowable deduction under section 8-1 of the ITAA 1997.

In your case, it is accepted that the course undertaken has maintained and improved the knowledge and skills that are required to perform your current employment duties.

Consequently, the expenses incurred in undertaking the course have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997, provided the substantiation requirements are satisfied.

Travel expenses

Where a taxpayer is undertaking a work related course of study, travelling expenses may be claimed for travel between the following:

· home and a place of education and back again; and

· the place of employment and the place of education and back again.

· However, only the first leg of each trip is deductible where you travel:

· from home to a place of education and then to work;

· from the place of employment to a place of education and then home.

The costs of the second leg of the outward journey are costs incurred in order to get to work and the costs incurred in the second leg of the return journey are costs incurred in order to return to the taxpayer's home. As the essential character of this type of expenditure is of a private nature these costs are not deductible

In your case, you have incurred travel expenses in relation to your course of study. As previously acknowledged, there is a sufficient connection between your course of study and your income earning activities.  

Accordingly, as the travel undertaken was from your home to the training venue, you are entitled to a deduction for your travel expenses under section 8-1 of the ITAA 1997.

Accommodation and meal expenses

Taxation Ruling TR 98/9 states that the expenditure on accommodation and meals ordinarily has the character of a private or domestic expense. However, you may be entitled to claim a deduction for accommodation and meals expenses when:

· you are participating in work-related study, and

· you are required to be temporarily away from home for one or more nights.

In your case, you have incurred accommodation and meal expenses in relation to your course of study.

Accordingly, as you were participating in work-related study and required to be temporarily away from home for one or more nights, you are entitled to a deduction for your accommodation and meal expenses under section 8-1 of the ITAA 1997.

Textbooks

Generally texts books are an allowable deduction, where there has been a sufficient connection established between your course of study and the duties that you are required to perform in your income earning activities, under section 8-1 of the ITAA 1997.

Accordingly, as there is a connection between the course of study and your income earning activity, you are entitled to a deduction for your textbook expenses under section 8-1 of the ITAA 1997.

Equipment

A deduction is not allowable under section 8-1 of the ITAA 1997 for the cost of tools and equipment as it is considered to be a capital expense. However, a deduction is allowable under section 40-25 of the ITAA 1997 for depreciation of tools and equipment owned during the year for income-producing purposes.

If the equipment is also used for private purposes, you cannot claim a deduction for that part of the decline in value. You cannot claim a deduction if the equipment is supplied by your employer or any other person. Generally, the amount of your deduction depends on the effective life of the equipment.

If you purchased equipment costing $300 or less and you use it mainly for work, you can claim an immediate deduction for the work-related portion of the cost. You cannot claim an immediate deduction if:

· the equipment is part of a set that you buy in the same income year and the total cost of the set is more than $300 (the set rule), or

· the equipment is one of a number of identical or substantially identical items you buy in an income year and the total cost of the items is more than $300 (the multiples rule).

In your case, you have incurred expenditure of less than $300 to purchase equipment to use in relation to your course of study. Accordingly, you are entitled to claim an immediate deduction for the cost of each item.

Limit on deductibility Section 82A

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 our website at www.ato.gov.au.