Edited version of private advice

Authorisation Number: 1052019585347

Date of advice: 24 August 2022

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self-education expenses incurred in association with completing a university degree under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your current employment

You are employed in a professional capacity.

Details of your role and responsibilities are as per below:

•         Legal, policy and legislative research

•         Advising Australian and foreign clients with respect to product strategy and compliance obligations

•         Drafting and reviewing submissions and other communications

•         Conducting technology due diligence on behalf of clients engaged in the sale or acquisition of technology businesses or ICT aspects of companies

•         Drafting and negotiating transactional documents

•         Producing technology regulation related firm publications for market.

The completed study

You applied to complete a university degree that was relevant to your occupation.

The program is a XX month full time in person course of study including doctrinal and practical training. Units covered are as per below:

•         How Technology is reshaping democracy and our lives.

•         Introduction to Intellectual Property

•         Advanced Torts, Defamation, Privacy and Emotional Distress

•         In house Product and Technology Counsel

•         Law, Science and Technology Colloquium

•         Introduction to American Law

•         Professional Responsibility

•         Fundamentals of Cyber Policy and Security

•         The Social and Economic Impact of Artificial Intelligence

•         Data, Privacy, Property and Security

•         Confronting Misinformation Online Law and Policy

•         Research Seminar on Cybersecurity, Topics at the Intersection of Security, Safety and Privacy

•         Explaining Chinese Tech Policy

•         Blockchain and Cryptocurrencies: Law, Economics, Business and Policy

•         Freedom of Speech and Press

The course commenced on XXXX and concluded on XXXX., during which time you were on a "leave of absence" from your employer

You did not receive Austudy, Abstudy, or Youth Allowance to study overseas. and are not otherwise being reimbursed by your employer for any additional expenses incurred.

You undertook the course to improve your data privacy and cybersecurity law and policy knowledge which was achieved via coursework and research related to these legal fields, as well as your drafting and negotiating skills related to high technology transactional matters, both of these which are relevant to your role and the matters for which you are responsible including data and cyber incident advisory, regulatory affairs and engagement, high technology transactional matters, and litigation and regulatory enforcement matters regarding technology clients.

Support from Employer

You applied for a merit scholarship to support the course which is available to employees to support the cost of external study relevant to their work at the firm.

You signed the acceptance of the scholarship terms and conditions (which was conditional on your return to your employer after a period of "absence of leave" from XXXX until XXXX).

If you do not return to your employer at the end of the 24-month leave of absence, or return but leave after XX months of returning, you will be required to repay XX% of the funding assistance received. If you leave between XX and XX months, you will repay XX% of the funding assistance received.

During the leave of absence, no salary or superannuation contributions will be paid on your behalf.

The scholarship was used to fund accommodation and living expenses.

Living Arrangements

You were living on campus for the duration of the course.

You do not own a principal place of residence in Australia and due to the length of your leave of absence, you did not maintain a rental lease. Your personal belongings have been stored at your parent's residence.

You plan to return to Australia following your leave of absence.

Expenses

The cost of tuition was $XXXX, which you funded with savings and a personal loan of $XXXX.

You personally financed the additional general course expenses including loan fees, computer consumables, student union, services and amenities fees, textbooks, airfares incurred to travel overseas for the course of study and campus technology fees.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 900-115

Income Tax Assessment Act 1997 section 900-120

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 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. 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.

When considering items that would be allowable as a self-education deduction consideration to the item being compulsory and unavoidable expenses, as well as those for which a need can be shown, are regarded as 'necessarily incurred'. This includes expenditure on fares, travel and accommodation, as well as fees, books and equipment to the extent they are incurred in pursuing a prescribed course of education. The balance is between expenses needed to fulfil the requirements of the course and those related to the provision of items, etc., which may merely serve a useful purpose.

In your case, it is accepted that the course will maintain or enhance the skills that you require to perform your duties in your occupation. Consequently, the self-education expenses you incurred have the necessary and relevant connection with the earning of your assessable income and are allowable deductions under section 8-1 of the ITAA 1997.

Course Fees, Student Union Fees, Textbooks, Stationery

TR 98/9 provides that course fees, student unions fees, textbooks, stationery costs incurred in attending an educational institution where there is a necessary and relevant connection with the earning of assessable income is an allowable deduction under section 8-1 of the ITAA 1997. Therefore, the expenses you incurred for course fees, textbooks, and stationery costs relating to the study you undertook overseas are deductible self-education expenses.

Accommodation

Paragraph 24 of TR 98/9 provides that accommodation expenses would not be deductible under section 8-1 of the ITAA 1997, where the accommodation constitutes the establishment of a new home. You have not established a new home in XXXX, and it is your intention to return to Australia at the end of your leave of absence. The purpose of the accommodation is to attend the university and is only maintained during your study at XXXX University.

Therefore, expenditure on accommodation is an allowable deduction under section 8-1 of the ITAA 1997 as you have not established a new home in XXXX.

Airfares

Paragraph 111 of TR 98/9 further 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.

Visa

The purpose of obtaining a visa is to allow you to enter and stay in another country. The expense is not considered to be incurred in the course of gaining or producing your assessable income. Therefore, the expense is private in nature and is not an allowable deduction under section 8-1 of the ITAA 1997.

Decline in Value - IT Related Purchases

Paragraph 79 of TR 98/9 states you can deduct an amount for the decline in value of assets such as technical instruments and equipment, computers, calculators, professional libraries, filing cabinets and desks if the self-education satisfies the principles outlined in paragraph 13 and 14. You can claim assets that cost more than $300 over the life of the asset (decline in value). However, if the asset costs $300 or less you can claim an immediate deduction for the full cost of the asset to the extent that you used it for study in the income year you bought it. You must also reduce your deduction by the extent to which you use the asset for other than a taxable purpose.

Loan Interest

A deduction is allowable for interest incurred by a taxpayer on moneys borrowed to pay for self-education expenses which are deductible.

Regard must be had to the connection between the interest expense and the income-earning activity in each income year interest is claimed because a change in circumstances, for example, a change of employment, may mean that the necessary connection no longer exists. Regard must also be given to the nature of the funds borrowed, for example, if part of the borrowed funds relate to other private expenses, you will need to apportion the interest expenses accordingly.