Edited version of private advice

Authorisation Number: 1051664028898

Date of advice: 13 May 2020

Ruling

Subject: Self-education expenses

Question 1

Are you able to deduct the expenses you have incurred or will incur for self-education listed in Table A under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes

Question 2

Are you able to deduct the expenses you have incurred or will incur for self-education listed in Table B under section 8-1 of the ITAA 1997?

Answer 2

No

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a senior lawyer working for the government.

You are employed in the xxxx team in the area of dispute resolution.

You undertake case work primarily relating to issues of xxxx litigation and advice matters.

You have been accepted to study a Master of Laws (LLM) at XXXX University from 20XX to 20XX.

You have chosen a course of study based on your particular area of work.

Your employer has provided a letter of support in relation to you undertaking this study.

Whilst studying you will take accrued annual leave at half pay and the remainder will be unpaid leave.

You will remain working for your employer after completing your studies when you return to Australia.

Undertaking this course will enable you to receive a higher income in the future and also increase your chances for promotion.

Your performance plan (part of yearly employment review) requires you to demonstrate particular knowledge and expertise which you believe will be enhanced by undertaking this course.

You are seeking to claim approximately $XXX of deductions.

You have made application for funding from your employer to support your attendance at XXXX University in terms of costs of living and tuition fees. You have not received any funding from your employer as yet.

XXXX University has also offered a $XXX tuition waiver, however this may be withdrawn if your financial situation changes.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1936 section 82A

Summary

Question 1

You are entitled to a deduction for all of the expenses listed in Table A. The expenses in Table A are considered to have been incurred in gaining or producing assessable income and are not of a capital, private or domestic nature.

Question 2

You are not entitled to a deduction for the expenses listed in Table B as these expenses are considered to be private in nature.

Detailed reasoning

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 (TR 98/9) discusses the circumstances under which self-education expenses are deductible. Self-education expenses are an allowable deduction 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; (1961) 8 AITR 406).

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. This study will increase your skills and make you more effective in your role when you return to Australia to your government position. This study will also enhance your professional standing within this field and enable your income earning capacity to increase.

We accept that this study will enhance your existing skills and knowledge that you use in your current employment at this time. Therefore, a deduction will be allowable for the self-education expenses you have incurred in relation to your overseas study, to the following extent:

Course fees and application fees

TR 98/9 provides that course and tuition fees incurred in attending an educational institution where there is a necessary and relevant connection with the earning of assessable income is allowable under section 8-1 of the ITAA 1997.

Therefore, the expenses you incurred for course and tuition fees and application fees at XXXX University are deductible self-education expenses. The expenses you incurred in relation to submitting applications at other universities, document fees, obtaining and shipping transcripts, telephone calls and Admissions Council fees are also deductible under section 8-1 of the ITAA 1997.

Airfares

Taxation Ruling TR 98/9 provides that 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 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution. In your case, your travel overseas to undertake your course of study is an allowable deduction.

You will only be allowed the full cost of your airfares where you travel directly to and/or from your destination (Case 4321 19 ATR 3465). If you break your travel for private purposes, a portion of your expenses will be private in nature and not deductible.

Textbooks

Reference books and textbooks are generally used during the course of study and, in most cases, only in the year of purchase. You can deduct the cost of the books under section 8-1 of the ITAA 1997.

Health insurance

Health insurance costs are generally considered to be a private expense. You are therefore not entitled to a deduction, under section 8-1 of the ITAA 1997, for the portion of the fees that were incurred for the health and related services fee and health insurance as this expenditure is considered to be private in nature.

Other rules and information in relation to your Self education expenses claim

Funding received and deductions

If you are reimbursed for any expenses, you cannot claim these amounts as deductions as you have not incurred them. This ruling is also contingent on you maintaining your current employment.

Exchange rates

When claiming these deductions, the expenses incurred must be translated (converted) to Australian dollars before including them in your return. From 1 July 2003, there are specific rules which tell you which exchange rate to use to convert these amounts. Generally, these require amounts to be converted at the exchange rate prevailing at the time of a transaction, or at an average rate.

The average rates are published on the Tax Office website and can be accessed through the fact sheet Foreign exchange (forex): general information on average rates.

Limit on deductibility Section 82A

The self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9, which can be accessed on the Tax Office website.