Edited version of your written advice

Authorisation Number: 1012964492071

Date of advice: 11 February 2016

Ruling

Subject: Self-education expenses

Question 1

Are you entitled to a deduction for the expenses incurred for your university fees and flights?

Answer

Yes.

Question 2

Are you entitled to a deduction for the expenses you incur for your meals?

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 are currently living and working in Australia.

You undertook a post-graduate degree.

The course of study you undertook was offered by an overseas university.

This course is related to maintaining and improving skills required for your current employment.

You took a leave of absence from your employment whilst you are undertaking the course.

You incurred costs for flights overseas, meals and university fees.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 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 that they 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).

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 taxpayer's 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.

TR 98/9 at paragraph 111 states that where airfares are a necessary part of the cost of attending an educational institution overseas, then those expenses are deductible under section 8-1 of the ITAA 1997.

In your case it is accepted that the study has sufficient nexus to your income earning activities. Therefore, the expenses incurred for university fees and airfares are an allowable deduction under section 8-1 of the ITAA 1997.

Meals 

Expenditure on meals ordinarily has the character of a private or domestic expense and is therefore not deductible under section 8-1 of the ITAA 1997. 

With regard to self-education expenses, TR 98/9 explains that where a taxpayer is away overnight, the meal expenses incurred form part of the necessary cost of participating in the educational activity. As such these expenses would have the same connection as other deductible self-education expenses to the earning of assessable income.  

However, paragraph 24(c) of TR 98/9 explains that expenditure on meals will not be allowable as a self-education deduction where a taxpayer has travelled to another location and has established a new home.  Paragraph 93 of TR 98/9 lists the key factors to be taken into account in determining whether a new home has been established.  These factors include: 

• the total duration of travel undertaken; 

• whether the taxpayer stays in one place or moves from place to place; 

• the nature of the accommodation, for example at a hotel, motel or long term accommodation; 

• whether the taxpayer is accompanied by their family members; 

• whether the taxpayer maintains a home at their previous location while away; and  

• the frequency and duration of any return trips made to the previous location

In your case we conclude you established a new home for the duration of your overseas stay. Accordingly, the meal expenses that you incurred are of a private and domestic nature and therefore are not deductible under section 8-1 of the ITAA 1997.