Edited version of your written advice

Authorisation Number: 1013064940819

Date of advice: 5 August 2016

Ruling

Subject: Self-education expenses

Questions and answers

1. Are you entitled to a self-education deduction for airfares to and from Country Y to undertake your training and attend conferences as part of the training?

Yes.

2. Are you entitled to a self-education deduction for airfares to return to Australia to visit your family and check on your home in Australia?

No.

3. Are you entitled to a self-education deduction for professional registrations in Country Y?

Yes.

4. Are you entitled to a self-education deduction for the costs associated with obtaining a visa for Country Y?

No.

5. Are you entitled to a self-education deduction for accommodation and meals while you are training in Country Y?

No.

6. Are you entitled to a self-education deduction for the portion of the car lease which relates specifically to your employment and training in Country Y?

Yes.

7. Are you entitled to a self-education deduction for your mobile phone which relates to your employment while in Country Y?

Yes.

8. Are you entitled to a self-education deduction for the costs of the internet, a computer and stationery relating to your training?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2017

The scheme commenced on:

1 July 2016

Relevant facts and circumstances

You are a resident of Australia for taxation purposes and you will remain a resident of Australia for taxation purposes for the period you are in Country Y

You are a professional.

You are going overseas to work and train.

You will receive a stipend for $XX,000.00 for the time you are in Country Y and you will declare this in your Australian tax return.

The stipend is taxed in Country Y.

You are seeking a deduction for the following:

• Flights to and from Country Y to undertake the training

• Flights to conferences as part of your training

• Flights back to Australia to visit family and check on your house

• Accommodation and meals in Country Y

• Relevant registrations to work and train in Country Y

• Car lease in Country Y

• Mobile phone use

• Visa

• Internet, computer and stationery

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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 where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

In addition, 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, the self-education expenses are allowable as a deduction.

However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist.

In your case you are going to Country Y to undertake training in.

This training will enhance your current skills as a Professional

The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current position as a Professional and the training.

Accordingly, you are entitled to a deduction for the costs associated with your training in Country Y.

The airfares to and from Country Y to undertake the training along with the flights to conferences as part of your training is an allowable deduction.

The expenses associated with registrations in Country Y are also an allowable deduction.

The accommodation and meals are not an allowable deduction as these are private and domestic in nature.

The expenses you incur enable you to stay in proximity to your work and training place. They are a prerequisite to the earning of assessable income and are not expenses incurred in the course of gaining or producing that income.

The portion of both the car lease and mobile phone which relates to your employment and training in Country Y is an allowable deduction.

The expenses associated with acquiring visas relate primarily to the taxpayer's personal right to travel to any overseas destination. They closely parallel the costs associated with obtaining a driver's licence, which were characterised as being of a private nature (Case P55 82 ATC 253; 25 CTBR (NS) 824 Case 117). Thus expenditure in obtaining a passport and visa is generally private in nature. Similarly expenses such as travel insurance policies invariably cover items that are generally private in nature, for example, illness, loss of baggage and theft or damage to belongings.

As the expenses incurred on visas are considered private in nature, they are not allowable deductions.

The costs associated with the internet and stationery is an allowable deduction and must be apportioned based on personal use.

You may be able to claim an outright deduction for a computer or you may be able to claim depreciation over a number of years depending on the cost of the computer.

Computer

Division 40 of the ITAA 1997 provides that a taxpayer may be entitled to a deduction for the decline in value of a depreciating asset that is used during the income year for a taxable purpose. Taxable purpose includes the purpose of producing assessable income under subsection 40-25(7) of the ITAA 1997.

Section 40-30 of the ITAA 1997 provides a definition of depreciating assets. They are assets that have a limited effective life and can reasonably be expected to decline in value over the time it is used.

Subsection 40-80(2) of the ITAA 1997 provides that if a depreciating asset costs less than $300 an immediate deduction may be claimed to the extent that it is used for a taxable purpose during the income year in which the deduction is available. 

An immediate deduction is available if all of the following tests are met in relation to the asset:

• the cost does not exceed $300, and

• you use the item predominantly for the purpose of producing assessable income, and

• the item is not part of a set that you purchased in that income year where the total cost of the set exceeds $300, and

• the total cost of the item and any other identical or substantially identical item that you purchase in that income year does not exceed $300.

In your case, you want to claim a deduction for a computer to use while you are in Country Y working and training.

Therefore, you can claim a deduction for the decline in value of the computer only if the price of the computer exceeds $300, under Division 40 of the ITAA 1997.

Please note that for any personal use you will need to apportion the amount that you claim for the decline in value of the computer.