Edited version of private advice

Authorisation Number: 1051912153499

Date of advice: 20 October 2021

Ruling

Subject: WRE - self-education

Question 1

Are you entitled to claim a deduction for all your self-education expenses associated with a course of education held overseas under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

Question 2

Are you entitled to a deduction for the cost of your course fees under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 3

Are you entitled to a deduction for the cost of your airfares to and from the overseas educational institution under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 4

Are you entitled to a deduction for the cost of your transport between your accommodation and the educational institution under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 5

Are you entitled to a deduction for the cost of your food and accommodation while attending your studies under section 8-1 of the ITAA 1997?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are employed full-time as an XXXX.

Your current employment requires in-depth knowledge of corporate strategy, accounting, corporate finance, economics and marketing. Deepening your expertise in these areas is likely to lead to an increase in your salary from your current role.

You have been admitted to a XXXX course at an overseas educational institution.

You are undertaking the XXXX course because you believe it will provide you with the in-depth knowledge and experience required to further excel in your current role and future management and leadership roles with your current employer.

To attend the course, you are using your accrued annual leave and then long service leave. Once your long service leave concludes you will take leave without pay.

You will be staying in temporary shared accommodation while undertaking the course. Your partner will remain in Australia and you will maintain your residence.

You will lease a car for the duration of your study which will allow you to drive from your place of accommodation to your studies.

Your employer has encouraged you to undertake the course and have stated that it will allow you to develop the skills and knowledge that are relevant to your current role.

You are wholly covering all expenses relating to the course including tuition fees, airfares and living expenses. Your employer is not providing you with any monetary support.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

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 to the extent to which they are of a capital, private or domestic nature, or relate to the earning of exempt income. 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.

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.

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, textbooks 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

Additionally, motor vehicle expenses between a taxpayer's home and an educational institution (including a library for research) are allowable.

Course fees

In your case, it is accepted that the XXXX course will maintain or enhance the skills that are required in the performance of your current role. Therefore, as outlined in TR 98/9 you are allowed a deduction for your course fees incurred in attending an educational institution under section 8-1 of the ITAA 1997.

Airfares

You will incur the expense of airfares in travelling overseas to attend an educational institution; you will therefore be entitled to a deduction for these costs under s 8-1 of the ITAA 1997.

Accommodation and food

Whilst overseas, you will incur accommodation and food expenses. 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 and food expenses will retain their 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.
• whether the taxpayer is maintaining a home at the previous location while away.; and
• the frequency and duration of return trips to the previous location.

In your case you will be staying in shared accommodation over a period of approximately X months. The length of time that you will live overseas in the one location indicates that you will establish a new home for that period. Therefore, you are not entitled to a deduction for your accommodation or meal expenses while living overseas, as the expenses are not incurred in gaining or producing assessable income. The expenditure is inherently of a private or domestic nature and is not allowable under section 8-1 of the ITAA 1997.

Motor vehicle expenses

You will incur costs travelling between your new home in Country X and the educational institution. These costs are an allowable deduction under section 8-1 of the ITAA 1997.

Please note that the car hire expenses will need to be apportioned for any private use of the vehicle.