Edited version of private advice

Authorisation Number: 1052169937595

Date of advice: 18 September 2023

Ruling

Subject: Deductions - self-education expenses

Question 1

Are you entitled to a deduction for the cost of airfares, tuition fees, the student activity fee, University services and support fee, One-time document fee, textbooks, stationery, and printing/photocopying expenses incurred under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 2

Are you entitled to a deduction for the cost of the student health fee and student health insurance incurred to under section 8-11 of ITAA 1997?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed as a Senior Lawyer.

You are currently undertaking a Master of Law degree (LLM) at XX University (the University) in Country A.

You have taken a leave of absence from your employment to complete the course.

Your employer has supported you to undertake the postgraduate study and on completion of the course you intend to return to your place of employment.

You are not receiving an allowance or being reimbursed for the expenses incurred to undertake this study.

Your employer has agreed to pay AUD$XX towards your tuition, to be paid directly to the University.

You are not claiming a deduction for the AUD$XX that your employer has agreed to pay.

You are taking subjects which are specifically related to the areas of law in which you practice.

The purpose of undertaking the course is to obtain a higher level of remuneration with your existing employer.

The course will improve your legal knowledge and the technical skills you apply in your current role.

On XX XXX 20XX, you incurred travel expenses when you purchased a flight to XX.

On XX XXX 20XX, you paid a portion of your LLM costs, including:

•         Tuition fees

•         Student activity fee

•         University services & support fee

•         One-time document fee

•         Textbooks

•         Stationery and printing/photocopying expenses

•         Health and related services fee

•         Student health insurance

You have paid AUD$XX towards these mandatory charges.

You will incur living expenses such as rent, utilities and food.

You do not seek to claim a deduction for the living expenses.

On XX XXX 20XX, your LLM course commenced.

On XX XXX 20XX, you expect to complete the LLM course.

You expect to incur additional expenses with the purchase of textbooks, stationery, printing/photography credits and return flights home to Australia during the 20XX financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 82A

Reasons for decision

Question 1

Are you entitled to a deduction for the cost of airfares, tuition fees, the student activity fee, University services and support fee, One-time document fee, textbooks, stationery, and printing/photocopying expenses incurred under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

Yes. You are entitled to a deduction for these expenses as we are satisfied that there is a sufficient connection between your self-education expenses and your current income earning activities.

Question 2

Are you entitled to a deduction for the cost of the student health fee and student health insurance under section 8-11 of ITAA 1997?

Summary

No. It is considered that these expenses are of a private nature. You are not entitled to a deduction for the cost of the student health fee and student health insurance under section 8-1 of the ITAA 1997.

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.

Self-education expenses you can claim

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business states that a deduction is allowable for self-education expenses 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.

This ruling also indicates that 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 their current income earning activities in the future, then a deduction is allowable.

In your case, it is accepted that the Master of Laws at the University will maintain or enhance the skills that are required in the performance of your current employment duties.

Accordingly, as your self-education directly relates to your current employment as a solicitor, you are entitled to a deduction for the cost of your tuition fees, the student activity fee, University services and support fee, One-time document fee, textbooks, stationery, and printing/photocopying expenses.

Airfares

The deductibility of airfares is dependent upon the reason the expenses were incurred.

Taxation Ruling TR 95/9 Income tax: employee lawyers - allowances, reimbursements and work-related deductions states that airfare expenses 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 part of the necessary cost of participating in the tour or attending the conference or seminar or the educational institution.

In your case, you incurred airfare expenses to fly to Country A to undertake a Master of Law at the University. Accordingly, as the course is an eligible self-education expense, you are entitled to a deduction for the cost of your airfares.

Self-education expenses you cannot claim

Health insurance

Insurance policies invariable cover items that are generally private in nature such as illness.

In Case T78 86 ATC 1094 the Administrative Appeals Tribunal allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that his claim for travel insurance was expenditure of a private and domestic nature.

ATO ID 2001/615 Income tax: Deductibility of travel insurance details that expenses such as insurance policies invariable cover items that are generally private in nature. This interpretive decision also lists Waters v. FC of T ATC 10-157 in which the Tribunal held that a taxpayer who had acquired travel (including medical) insurance prior to commencing work overseas was not entitled to a deduction for this expenditure. This expenditure could not be regarded as being incurred by Mr Waters 'in the course of' gaining or producing his assessable income and was otherwise not deductible as it was an expense of a private or domestic nature.

In your case, you incurred the costs of a student health fee as well as health insurance expenses to enable you to undertake your self-education at the University. Although it is accepted that these expenses were paid as a pre-condition to enable you to attend the University, this does not change the fact that these expenses under section 8-1 of the ITAA 1997, are private in nature.

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 our website at www.ato.gov.au.