Edited version of private advice

Authorisation Number: 1051967349110

Date of advice: 27 April 2022

Ruling

Subject: Income tax - self-education expenses

Question 1

Are you entitled to a deduction for self-education expense for your course fees?

Answer 1

Yes. Your course fees are deductible, as it is accepted the study meets the requirements detailed in Taxation Ruling TR 98/9. Further information about self-education expenses can be found by searching 'QC 31970' on ato.gov.au

Question 2

Are you entitled to a deduction for travel, accommodation, utilities, house set-up, furniture and food expenses in connection to undertaking work and training?

Answer 2

No

This ruling applies for the following periods:

Year ending 30 June XXXX

Year ending 30 June XXXX

The scheme commences on:

4 February 2019

Relevant facts and circumstances

You emigrated to Australia with your wife in XXXX.

You have been registered as a qualified medical practitioner with The Australian Health Practitioner Regulation Agency (AHPRA) since XXXX.

You previously completed your medical intern and resident years within a large tertiary overseas hospital.

You began working with XXX in Australia in XXXX.

You worked in medicine for 18 months prior to joining the training programme in XXXX.

You must already be a qualified doctor to enter the training program.

You were employed by XXX under a temporary contract from XXXX to XXXX.

Your contract stated: "During your employment, you may need to work at other facilities which may include other metropolitan and rural hospitals".

You were seconded to work at another hospital for 12 months.

You incurred significant costs to complete the training in the new hospital including travel, accommodation, utilities, house set-up, furniture and food.

You received funding of $XX to assist with these expenses. These scholarship funds were declared in your tax return.

You incurred training fees of $XX.

You and your wife entered into a 12 month long-term lease for accommodation in the new location as securing accommodation during COVID was problematic and the nature of your shift-work made staying in short term rental and checking in and out difficult. You paid $XX per week in rent.

Your family did not relocate with you.

You were rostered on for X days in every fortnight at your new workplace.

You regularly returned to visit your family.

You completed the secondment on XXXX.

You returned to your family home on XXXX after your secondment had finished.

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 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses the circumstances under which self-education expenses are allowable as a deduction.

In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 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 (paragraph 12 of TR 98/9 and referred to within FC of T v Finn (1961) 106 CLR 60 (Finn's case)); or

§  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 their current income earning activities in the future (paragraph 13 TR 98/9 and referred to in the case of FC of T v Hatchett (1971) 125 CLR 494 (Hatchett's case)).

Paragraph 89 of TR 98/9 outlines:

Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meal 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, TR 98/9 goes on to state that expenditure on meals and accommodation incurred while undertaking a self-education activity will not be deductible where the taxpayer has established a new home. In these circumstances, the accommodation and meal expenses are considered to retain their inherently private nature.

Paragraph 93 of TR 98/9 lists the key factors to consider in order to determine whether a new home has been established. These factors 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.

•         the fact that the taxpayer did not maintain a home while away for an extended period was the decisive factor in characterising expenditure on accommodation and meals as private 'living expenses' in a series of Board of Review decisions: Case N13 13 TBRD (NS) 45; 10 CTBR (NS) Case 98; Case N16 13 TBRD (NS) 65; 10 CTBR (NS) Case 99; Case N19 13 TBRD (NS) 76; Case N20 13 TBRD (NS) 79; and

•         the frequency and duration of return trips to the previous location.

The question of whether a new home has been established depends on all the facts. There is no one test to satisfy all the circumstances. TR 98/9 provides examples designed to illustrate factors and circumstances that are relevant in determining whether a taxpayer has established a new home in the new location.

Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: employees: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances explains when an employee can deduct accommodation and food and drink expenses under section 8-1 of the ITAA 1997 when they are travelling on work, including where it is necessary to apportion the deduction.

Paragraphs 38 to 42 of TR 2021/4 address 'Living at a location':

38. Whether accommodation and food and drink expenses are incurred in gaining or producing assessable income is a question of fact.

39. An employee who incurs expenditure on accommodation and food and drink in the course of performing their income-producing activities is likely to be travelling on work and the expenses will be deductible (see paragraphs 10 and 16 to 23 of this Ruling).

40. However, where an employee is living at a location away from their usual residence, their accommodation and food and drink expenses are living expenses and will not be deductible even if the employee is living at that location due to their employment (see paragraphs 9, 14 and 15 of this Ruling).

41. This is because, where the location at which the employee works has become their new regular place of work, the accommodation and food and drink expenses are not an incident of their income-earning activity. Rather, the employee's personal circumstances are such that their usual residence is not located near their new workplace. Consequently, the employee is living at a location away from their usual residence and their accommodation and food and drink expenses will not be deductible.

42. The following factors would support a characterisation of an employee as living at a location away from their usual residence:

•         there is a change in the employee's regular place of work

•         the length of the overall period the employee will be away from their usual residence is a relatively long one

•         the nature of the accommodation is such that it becomes their usual residence

•         whether the employee is, or can be, accompanied by family or visited by family and friends.

We have considered your comments and circumstances against the key factors noted in paragraph 93 of TR 98/9 and paragraph 42 of TR 2021/4 in order to determine whether you established a home in XX. Based on this analysis we have determined you have relocated to XX because:

§  You were required to work and undertake training at XX for one year.

§  You worked and studied only in XX and did not go to any other work/training location during that period.

§  You were rostered on for eight days in every fortnight at your work/training location in XX.

§  You stayed in long term accommodation in XX.

§  You engaged a removalist to help you relocate to XX.

§  You set up the XX apartment with new bedding, furniture and kitchenware.

The following contentions that you provided were also considered:

1)    You maintained a home at your original family home

2)    Your family did not accompany you

3)    You frequently travelled back to your family home to see your spouse and children

However, these factors are not considered enough to outweigh the other factors that point to you having a home in XX while you worked and trained there.

Consistent with the principles established in TR 98/9 and TR 2021/4, the Commissioner is satisfied that you have established a new place of residence for work and self-education purposes. Therefore, you are not entitled to claim a deduction relating to travel, accommodation, utilities, house set-up, furniture and food. In these circumstances, expenditure is private in nature and not allowable under section 8-1 of the ITAA 1997.