Edited version of your written advice

Authorisation Number: 1012890498723

Date of advice: 7 October 2015

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a deduction for self-education expenses for a course of education held overseas?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are self-employed as a performing artist. You were also employed as a specific teacher.

You travelled overseas to complete a trainee program in your chosen field.

You incurred the following expenses:

• Airfares

• Tuition and accommodation expenses

• Food and meal expenses

• Purchases of various items of clothing and footwear, both work related and conventional

• Stage make-up

• Public transport expenses

• Telephone expenses

• Tickets to attend theatre performances, other theatre and museums

You completed your training and then travelled for several weeks before returning to Australia.

You maintained a residence in Australia while you were overseas. Your family did not accompany you overseas.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Section 900-15

Income Tax Assessment Act 1997 Section 900-115

Income Tax Assessment Act 1997 Section 900-120

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 to the extent to which they are of a capital, private or domestic nature.

Taxation Ruling TR 98/9 discusses the deductibility of self-education expenses. Paragraph 13 of TR 98/9 states:

If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

Thus, self-education expenses incurred by a taxpayer will qualify for deduction under section 8-1 of the ITAA 1997, if there is a sufficient nexus to the production of assessable income and the improvement of a skill or some specific knowledge.

Paragraph 23 of TR 98/9 states that subject to the general tests under section 8-1 of the ITAA 1997 being met, the following types of expenses relating to approved self-education are allowable deductions;

• course or tuition fees of attending educational institutions, conferences or seminars

• the cost of professional and trade journals, text books and stationery

• airfares incurred on overseas study tours, on work-related conferences or seminars, or attending educational institutions

• where a taxpayer is away from home overnight or temporarily, accommodation and meal expenses incurred on overseas study tours, conferences or seminars, or attending an educational institution

In your case, you travelled overseas to complete a course in your chosen field. This study has enabled you to improve your skills in that field. You have therefore demonstrated that the course of education has a nexus to your current employment.

It must now be determined whether the expenses incurred are of a capital, private or domestic nature.

In addition to the above, most work related expenses must also satisfy the substantiation requirements of Division 28 and Division 900 of the ITAA 1997.

Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims.

Pursuant to sections 900-115 or 900-120 of the ITAA 1997, these expenses must be substantiated by a document setting out the following:

• the name or business name of the supplier of the goods or service, or asset

• the amount of the expense, or the cost of the asset

• the nature of the goods or service, or asset

• the day the expense was incurred, or asset was acquired, and

• the day the document was made out.

Airfares

You have incurred airfare expenses in travelling overseas. As these expenses were incurred in undertaking the self-education, you are therefore entitled to a deduction for these costs under section 8-1 of the ITAA 1997. However only the airfares incurred in travelling to and from the overseas country are deductible, as the other airfare expenses incurred within the overseas country are considered private in nature as they not related to your course of education.

Accommodation and food

Whilst overseas, you incurred expenses relating to accommodation and food. Expenditure on accommodation and food ordinarily has the character of a private or domestic expense. However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense. Paragraph 89 of TR 98/9 outlines:

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.

However, where it is considered that a taxpayer has established a new place of residence, the accommodation expenses will retain its private nature and will not be deductible.

TR 98/9 states:

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 fact that the taxpayer did not maintain a home while away for an extended period was the decisive factor in characterising expenditure on accommodation and meals as private 'living expenses' in a series of Board of Review decisions: Case N13 13 TBRD (NS) 45; 10 CTBR (NS) Case 98; Case N16 13 TBRD (NS) 65; 10 CTBR (NS) Case 99; Case N19 13 TBRD (NS) 76; Case N20 13 TBRD (NS) 79; and

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

In your case you were studying overseas for approximately X months. Your accommodation was provided by the educational institution and was included in your tuition fees. Your family did not accompany you, and you maintained a residence in Australia.

The relevant factors are the period of time you were away, the continuing maintenance of your home in Australia and the fact that your family did not accompany you. These factors indicate that a new home was not established overseas.

Therefore accommodation and food expenses incurred during the time you were engaged in your course of education are allowable deductions.

Accommodation and food expenses incurred after you completed your course of education are considered private in nature and are therefore not deductible.

Tuition fees

You incurred expenses for tuition fees. Therefore, as outlined in TR 98/9 you are allowed a deduction for these expenses under section 8-1 of the ITAA 1997.

Clothing and shoes

Taxation Ruling TR 95/20 addresses the deductions available to employee performing artists. The same principles also apply to your self-employment activities.

Paragraph 47 of TR 95/20 states a deduction may be available for clothing and footwear where the clothing and footwear is protective, occupation specific and not conventional in nature, a compulsory uniform, or a registered non-compulsory uniform.

Your expenses are therefore deductible for shoes and clothing specific to your chosen field.

You cannot claim a deduction however for items such as underwear, casual dress shoes, runners, socks, tops, jerseys, hats, sunglasses, scarves or jeans, which are all considered conventional clothing.

Make-up

Paragraph 25 of TR 95/20 allows a deduction for the cost of make-up bought by a performing artist for stage, film or television purposes. You have incurred expenditure on certain brands of cosmetics, which are generally seen as the leading brands in stage make-up. This expenditure is therefore deductible as it relates to performances undertaken as part of your course of self-education.

Theatre tickets

Paragraph 172 of TR 95/20 states that a deduction is allowable for the costs of attendance at theatre or film performances if the performances have a content specifically related to a performing artist's current work. Costs associated with attendance at performances for general interest or entertainment or other private purposes are not an allowable deduction.

It appears that there is a nexus between your employment and your expenditure on tickets to live theatre performances. It would be reasonable for a person in your chosen field to keep up to date with trends in the theatre. Ways of keeping up to date with the profession would include attending theatre performances.

In addressing the issues regarding the private component of going to the theatre or cinema, Windeyer J in Finn's case has also stated that:

"Outgoings incurred for the genuine purpose of acquiring or maintaining knowledge and skill in a vocation do not become an outgoing 'of a private nature' simply because the taxpayer got pleasure and satisfaction in increasing his knowledge and attainments."

You are therefore entitled to a deduction for attending those performances which directly relate to your chosen field.

You cannot claim however for expenses incurred to attend museums, or stage performances which have no connection to your chosen field.

You also cannot claim for expenses which do not satisfy the provisions of Division 900 of the ITAA 1997. This includes tickets purchased by others, tickets purchased for others, or instances where the details of the show are not included on the receipts.

Telephone expenses

Telephone expenses in relation to a course of self-education may be deductible where a nexus can be established between the telephone expenses and the course of education.

Work related mobile phone calls can be substantiated by paid highlighted itemised mobile phone accounts. Where itemised mobile phone accounts are not available, a reasonable estimate of work related mobile phone call expenses, based on diary entries of mobile phone calls over a period of one month, together with relevant paid mobile phone accounts, will be acceptable for substantiation purposes.

As you have not provided details of the self-education related proportion of your telephone expenditure you cannot claim a deduction for this expense.

Public transport fares

Paragraph 152 of TR 95/20 states that a deduction is available for transport costs in connection with a course of education for travel from home to the place of education and then back home. You can therefore deduct the cost of subway fares.