Edited version of your private ruling

Authorisation Number: 1012456273342

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a deduction for your self-education expenses?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You were a full-time student in the 2011-12 financial year.

You received a government benefit.

You were granted a scholarship during the 2011-12 financial year.

You received regular payments under the scholarship and were an employee of an organisation while the scholarship was paid. You performed duties for the organisation.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 26-19

Income Tax Assessment Act 1997 Section 26-20

Income Tax Assessment Act 1997 Section 51-10

Income Tax Assessment Act 1997 Section 51-35

Reasons for decision

Summary

You are entitled to a deduction for the costs, associated with your studies, which were incurred during the period you received your scholarship as you were required to work for an organisation as a condition of your scholarship.

Detailed reasoning

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. No deduction is allowed were a specific provision of the taxation legislation prohibits it.

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 your 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.

TR 98/9 also discusses the types of self-education expenditure that are considered to be allowable. These include:

· some course or tuition fees (see below for further discussion)

· books, journals and stationery

· accommodation and meals where you are required to be away from home overnight in connection with a self-education activity, and

· depreciation on a computer or laptop and internet access although only the study related usage proportion may be claimed.

Course or tuition fees incurred in attending an education institution, including student union fees, are allowable expenses under section 8-1 of the ITAA 1997. However, subsection 26-20(1) of the ITAA 1997 prevents a deduction for certain assistance provided to students. You cannot claim a deduction for:

· a student contribution amount within the meaning of the Higher Education Support Act 2003 paid to a higher education provider, or

· a payment to reduce a debt to the Commonwealth under Chapter 4 of that Act.

You have received income, in the form of government benefits and a scholarship, in relation to your studies. Each type of income will be examine to determine if you are entitled to claim any of your self-education expenses in relation to that income.

Deduction in relation to Youth allowance

From 1 July 2011, section 26-19 of the ITAA 1997 prevents a deduction for self-education expenses which are incurred in gaining or producing a rebatable benefit.

You received government benefits whilst studying. The government benefits you received were rebatable benefits. Therefore no deduction would be allowable for self-education expenses incurred in gaining your government benefits.

Deduction in relation to scholarship

Section 51-10 of the ITAA 1997 provides that if you are a full-time student at a university and receive a scholarship, bursary, educational allowance or educational assistance, then the amounts received are exempt from tax.

However, such payments are not exempt from tax if they are made on the condition that the student will be an employee of, or work for, the payer (section 51-35 of the ITAA 1997).

Your scholarship requires you to work for an organisation for the period of the scholarship and you are considered to be an employee.

The financial assistance you receive is not exempt from tax as it is a requirement you became an employee.

Your scholarship payments form part of your assessable income.

As your scholarship requires you to carry out the duties which were related to the content of your studies, it is considered that there is a sufficient connection between the assessable scholarship income and your self-education expenses.

Therefore you are entitled to claim a deduction for self-education expenses incurred during the period you received scholarship payments.