Edited version of private advice

Authorisation Number: 1051518733460

Date of advice: 16 May 2019

Ruling

Subject: Self Education

Question

Can you claim a deduction for university fees paid directly to the university?

Answer

No.

Question

Can you claim a deduction for any expenses incurred in relation to undertaking a Bachelor of Education (Early Childhood Teaching)?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are currently employed as a permanent part time educator assistant at a child care centre.

Your duties include:

·         To actively contribute to the education program in the room and centre

·         To engage and supervise children at all times while maintaining a safe environment for children, families and team members.

·         To assist the room leader and other full-time employees.

You are studying a Bachelor of Education (Early Childhood Teaching).

Your employer encourages you to undertake the course but only provides flexible work schedules to assist you in undertaking this course.

You do not receive any study leave.

You study during your own time.

Your reasons for undertaking the course are to upgrade your skills in early childhood education, to gain a higher role within the industry and increase your salary.

You currently hold a Diploma in Children's Services.

On completion of the course you will have the role of early childhood teacher, room leader and will have other potential leadership roles such as director or leader. You will also receive an increase in pay.

The university fee type you paid is HECS-HELP as stated on your course invoices.

The university fees are paid directly to the university and are not deferred under the HECS system.

Your other expenditure incurred in relation to the course include textbooks, stationery, computer expenses, tools and equipment.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 26-20

Reasons for decision

Question 1

Summary

HECS-HELP fees whether paid upfront or deferred for payment at a later date in an annual income tax assessment, are not an allowable deduction.

Detailed reasoning

Section 26-20 of the Income Tax Assessment Act 1997 (ITAA 1997) denies a deduction for certain higher education payments. HECS payments, whether up-front or deferred, are specifically made non-deductible and therefore no deduction is allowed.

TR 98/9 confirms this and explains that HECS fees payable for courses supported by the Commonwealth government under HECS (now known as HECS-HELP) are not an allowable deduction. This is so whether they are paid up front or deferred for payment at a later date in an annual income tax assessment.

Therefore, as your fee type on your university invoices states HECS-HELP, your study is a HECS-HELP based course and as such you are not entitled to claim a deduction for the fees as a provision of the ITAA 1997 specifically prevents it.

As your course fees are prevented from being deductible by section 26-20 of the ITAA 1997, the fees are not deductible even if the course is considered to be sufficiently related to your current income earning activities. However, you have also incurred other expenses in relation to undertaking the course and therefore we will examine at Question 2 whether the course is sufficiently related to your current income earning activities to be able to claim a deduction for these other expenses.

Question 2

Summary

Your study in this course is considered to open up a new income earning activity and therefore any expenses incurred in relation to the course are not deductible.

Detailed reasoning

Section 8-1 of the 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.

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 (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraphs 15, 48 and 62 of TR 98/9).

For example, a nurse studying a Bachelor of Medicine would not be entitled to a deduction for any expenses in relation to the course. Although the medical degree would assist them in their current employment as a nurse the course is designed to open up a new income-earning activity as a doctor. This is the case even if the nurse subsequently remained with the same employer on completion of the course.

You are currently employed as an educator assistant. On completion of the Bachelor of Education (Early Childhood Teaching) you will be qualified as an early childhood teacher (including a pre-school teacher). Under the National Quality Framework, child care centres must engage or have access to an early childhood teacher based on the number and age of children at the centre. Once you are qualified you will be able to fulfil this role for your employer. This is considered to be a different role to your current position as an educator assistant. As the course is designed to open up a new income-earning activity, the expenses incurred in undertaking the course are not deductible under section 8-1 of the ITAA 1997.

As discussed previously, even if there was a sufficient nexus between your Bachelor of Education (Early Childhood Teaching) and your current employment position, your course fees would still be excluded from being deductible by the operation of section 26-20 of the ITAA 1997. This section operates to specifically exclude course fees paid through HECS-HELP from being deductible; this is the case regardless of whether the course fees are deferred or paid up front.