Edited version of your written advice

Authorisation Number: 1012877362715

Date of advice: 14 September 2015

Ruling

Subject: Work Related Expenses

Work Related Expenses

Question 1

Are you entitled to claim a tax deduction for flights, accommodation and course fees associated with your self-education?

Answer

Yes.

Question 2

Are you entitled to claim a tax deduction for the costs incurred in relation to your application for an employer sponsored work visa?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2015.

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You came to Australia in 20XX on a visa.

You commenced work as a receptionist.

You were promoted and had to further your studies to maintain key job specific tasks.

You studied interstate mm/yyyy and mm/yyyy.

Your incurred flights, accommodation and course fee expenses.

The sole purpose of the trips was for study and exams

All course fees were paid by you.

In 20YY you applied for another promotion which required an employer nominated visa.

You incurred costs for flights, accommodation and visa application expenses.

You commenced your new duties in 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1,

Income Tax Assessment Act 1997 paragraph 26-20(1)(ca),

Income Tax Assessment Act 1997 paragraph 26-20(1)(cb),

Income Tax Assessment Act 1997 paragraph 26-20(1)(d) and

Income Tax Assessment Act 1936 section 82A.

Reasons for decision

Question 1

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 (Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education.

Amount of self-education expenses allowable

Section 82A of the Income Tax Assessment Act 1936 (ITAA 1936) can limit the amount of self-education expenses which can be claimed under section 8-1 of the ITAA 1997. Under section 82A of the ITAA 1936, the self-education expenses allowable can be reduced by up to $250.

However, before the $250 amount is deducted from the expenses allowable under section 8-1 of the ITAA 1997, other self-education expenses can be applied to reduce this $250 amount. These other self-education expenses are those expenses incurred which are not deductible under section 8-1 of the ITAA 1997. These can include expenses such as childcare, non-deductible travel, and the cost of capital items such as computers or desks.

Taxation Ruling 98/9 goes further into specific deductions -

Course or tuition fees

Course or tuition fees incurred in attending an educational institution or attending work-related conferences or seminars, including student union fees, are allowable under section 8-1. However, you cannot deduct a student contribution amount paid to a higher education provider under the Higher Education Support Act 2003: paragraph 26-20(1)(ca) of the ITAA 1997. Such payments are made by a student to cover the cost of a course of study at a tertiary educational institution. Repayment amounts for a Higher Education Loan Program debt or a Student Financial Supplement Scheme debt are also not deductible: paragraph 26-20(1)(cb) and paragraph 26-20(1)(d) of the ITAA 1997, respectively.

Accommodation and meals (as part of a travel expense)

Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meals expenses incurred are deductible under section 8-1. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities.

The key factors to be taken into account in determining whether a new home has been established 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, e.g., 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;

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

Airfares

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. They are part of the necessary cost of participating in the tour or attending the conference or seminar or the educational institution.

Application to your circumstances

It is considered that the study will maintain or improve your skill or knowledge used in your current income earning activity. The interstate trips were connected with a self-education activity and you did not establish a new home. In addition the airfares were incurred in attending an educational institution. Consequently you are entitled to claim deductions under section 8-1 of the ITAA 1997 for these self-education expenses.

As you did not incur any expenses that were not deductible under section 8-1 of the ITAA 1997, a deduction is not available in respect of the first $250. You will be entitled to a deduction for your self-education expenses minus the $250 under section 82A of the ITAA 1936.

Question 2

Section 8-1 of the ITAA 1997 allows a deduction for any losses or outgoings to the extent to which they are incurred in gaining or producing assessable income except to the extent outgoings are of a capital, private or domestic nature.

The courts have considered the meaning of 'incurred in gaining or producing the assessable income'. In Ronpibon Tin NL Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; 56 ALR 785; 8 ATD 431 the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'

The expenditure must therefore be related to the production of assessable income.

The cost of applying for a visa is considered private in nature and not deductible under section 8-1 of the ITAA 1997 because the purpose of applying for the visa was to allow you to remain legally in Australia.

The cost was not incurred in the performance of your employment duties. Accordingly, as the expense you incurred in applying for a work visa was not incurred in gaining your assessable income, you are not entitled to a deduction for this cost under section 8-1 of the ITAA 1997.