Edited version of your private ruling

Authorisation Number: 1012598258783

Ruling

Subject: self-education expenses

Question 1

Are you entitled to a deduction for self-education expenses for a medical training program?

Answer

Yes

Question 2

Are you entitled to a deduction for accommodation costs when living away from home while undertaking the medical training program?

Answer

No

Question 3

Are you entitled to a deduction for self-education expenses you will incur for materials and reference books?

Answer

Yes

This ruling applies for the following period

Year ending 30 June 2014

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You graduated from a university as a medical doctor and completing your internship and working as a medical doctor at hospitals in a metropolitan city.

You were selected into the medical training program by a medical organisation and you are now half way through the program.

The training program is co-ordinated by the organisation and covers a selected number of specialities that aims to ensure trainees progress through an integrated program which provides professional responsibility under appropriate supervision to become medical consultants.

During the term of the program you are in a full-time paid position as a medical doctor with the accredited hospital.

You have been training at the metropolitan city hospital and as part of the program you are required to complete a rotation at various hospitals outside your home region to expose you to various specialities.

You were allocated a rotation term by the organisation to an interstate metropolitan city hospital that has a unit that you can complete one of the medical specialities.

You were allocated accommodation in an interstate metropolitan city while you complete your rotation.

You have your own home that is not being rented and intend to return to your home at the end of the program.

You study in your own time and through the term of the training are assessed by accredited supervisors that includes in-training, logbooks, observation of medical procedural skills and mini clinical examinations.

For this rotation you will incur the following expenses:

Ø Apartment rental

Ø Training fees

Ø Course materials and reference books

All costs will be paid by you directly to the organisation.

You commenced the training program to enable you to maintain and improve your skills necessary to carry out your income earning activities as a doctor.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1936 Section 82A

Reasons for decision

Summary

You are entitled to a deduction for the course fees and materials and reference books you incurred for your medical training as it is considered that the self-education expenses have the necessary and relevant connection with your current income earning activities.

You are not entitled to a deduction for accommodation expenses as it is considered that you have established a new home in the interstate metropolitan city for the period of time that you are required to complete your rotational training.

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.

Taxation Ruling TR 98/9 (TR 98/9) provides the Commissioner's view for the circumstances under which self-education expenses are allowable as a deduction.

TR 98/9 provides that 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).

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

However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; TR 98/9).

You commenced a medical and education training program to become a medical consultant. The program is for a number of years and is co-ordinated by the medical organisation and you are employed as a full-time medical doctor during the program. You are required to complete a number of selected medical specialities at an accredited hospital allocated by the organisation to meet competencies required to become a medical consultant.

In your case, there is sufficient connection between the medical training program you are required to undertake and your current income producing activities. You undertook the program to enhance your existing capabilities, skills and knowledge that are required in the performance of your current employment as a doctor.

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

Accommodation

TR 98/9 states that where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meal expenses which are incurred are in fact deductible under section 8-1 of the ITAA 1997. However if the taxpayer establishes a new home then the accommodation and meals expenses are considered to be private and would not be deductible.

The key factors in determining whether a new home has been established are:

• The total duration of the travel;

• Whether the taxpayer stays in one place or moves frequently;

• Nature of the accommodation (eg hotel, long term accommodation);

• Whether the taxpayer is accompanied by his or her family;

• Whether the taxpayer is maintaining a home at the previous location whilst away;

• Frequency and duration of return trips to the previous location.

In your case, you were allocated to a hospital in an interstate metropolitan city for a period of the term as part of your medical training program. You have been provided with accommodation that is close to the hospital for this period while you will be maintaining a home in another state.

Based on these facts it is considered that you have established long term accommodation for the period of time that you are interstate. Accordingly, you are not entitled to a deduction for your accommodation expenses as these are considered to be private in nature.

Study books

Textbooks are generally used during the course of study and, in most cases, only in the year of purchase. In such circumstances, the cost of materials and reference books is allowable under section 8-1 of the ITAA 1997.

Further information

Please note that 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 Tax Office's website at www.ato.gov.au.