Edited version of private advice

Authorisation Number: 1052236426129

Date of advice: 24 April 2024

Ruling

Subject: Self-education expenses

Question 1

Are you entitled to a full deduction for self-education expenses for the XX such as XXXX and XXX costs incurred in association with completing a XXXX course under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes. These costs meet the requirements detailed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual which explains self-education expenses are fully deductible under section 8-1 of the ITAA 1997 where they have the relevant and close connection to your current income-earning activities as an employee.

Question 2

Are you entitled to a partial deduction for self-education expenses XX such as XXX and the XXXX and other XX costs incurred in association with completing a XXXX course under section 8-1 of the ITAA 1997?

Answer

Yes. These costs meet the requirements detailed in TR 2024/3 which explains self-education expenses are partly deductible under section 8-1 of the ITAA 1997 where they have the relevant and close connection to your current income-earning activities as an employee.

Paragraph 21 of TR 2024/3 considers the partial deductibility of self-education expenses. A partial deduction may be appropriate where only part of your expense is for self-education connected with your income-earning activities or where only part of the self-education is relevant to your income-earning activities.

Paragraph 83 of TR 2024/3 outlines that apportionment is appropriate if the expenses incurred are both income-producing and other uses. Where the self-education expense has distinct and severable parts, you apportion the expense according to its particular purpose.

In your case, the total trip took XX days from XX/XX/20XX to XX/XX/20XX. The work related portion is XX% while the private portion is XX%, which means you can claim X/XX of your accommodation and food expenses. You can claim XX% relating to your airline flights to XX and back to Australia.

You need to apportion your travel expenses if you add a holiday to the end of work-related travel. Your intention was to stay on for a holiday after the training. Only XX% of the airfares is allowed, as the expense was incurred for two distinct purposes, one income earning and the other private. The other XX% relating to the holiday in XXX is private in nature and not deductible under section 8-1 of the ITAA 1997.

Question 3

Are you entitled to a full deduction for self-education XX expenses such as XXX and XX costs incurred in association with completing an American Commercial helicopter licence conversion course under section 8-1 of the ITAA 1997?

Answer 3

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are employed within the aviation industry.

You are employed by a company on full-time basis.

Your employer has a XXXX contract to operate a XXX Helicopter to assist in the fire season period.

It is a legal requirement, that for you to fly the XX Helicopter, that you hold an XXX License.

Your job description includes being a XX trainer, a XX pilot and undertaking aerial work.

You completed the foreign licence conversion course - the XXXX Conversion.

The course to obtain the licence was done from XX/XX/20XX to XX/XX/20XX in XXX.

You self-funded the total cost of the course that is relevant to the duties in your current role.

The courses will result in an increase in wages and will further your career as a XX and XX in your current position with XXX.

Your travel during the entire overseas trip to attend the course has both private and work-related periods, so the costs are apportioned accordingly. You were in XXX for XX days. You attended the course for XX days out of XX days.

You added a holiday at the end of your work-related travel before returning to Australia for XX days.

Relevant legislative provision

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 where the outgoings are of a capital, private or domestic nature. It is well established that the words 'in gaining or producing assessable income' are to be understood to mean 'in the course of' gaining or producing assessable income and do not convey the meaning of outgoings incurred 'in connection with' or 'for the purpose' of deriving assessable income.

An expense will be fully deductible if there is no capital, private or domestic portion of the expense. To be deductible expenditure, there must also be a close relationship, or close connection between the expenditure and what it is that you do to produce your assessable income.

To determine whether circumstances exist that support your self-education deductions, it is necessary to determine whether there is a sufficient connection between you incurring your expenses and your current income earning activities. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

In your case, some of the expenses you incurred do not have a sufficient nexus to your current income-earning activities, are considered private in nature and are therefore not deductible.

Visa costs

Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income however it will not be allowed if the expense is of a private or domestic nature.

The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47, the High Court stated that:

'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.'

The cost of applying for a visa to enter a foreign country is considered to be a requirement for most international travel and is private in nature. The expense was not incidental and relevant to your current employment duties as XX and was not incurred in the course of gaining or producing your assessable income as an employee.

The purpose of obtaining the visa was in regard to entering XXX and is considered a pre-requisite to travel and attend the course in XX, rather than being a cost of the course of study itself.

You are not entitled to a deduction for the costs associated with your foreign visa under section 8-1 of the ITAA 1997.

Insurance

Expenses such as insurance policies invariably cover items that are generally private in nature, for example illness, loss of baggage, and theft or damage to belongings. In Case T78 [1986] AATA 318; 86 ATC 1094 (Case T78) the Administrative Appeals Tribunal (AAT) held that their claim for travel insurance was expenditure of a private nature.

In Case T78 AAT allowed a deduction to a barrister for airfares to attend a work-related course. However, the Tribunal held that their claim for travel insurance was expenditure of a private nature.

In Waters v. FC of T [2010] AATA 846; 2010 ATC 10-157 the AAT 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. The 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.

You are therefore not entitled to a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private in nature.

Application to your circumstances

In your case, there is a close and sufficient connection between some of the costs you incurred towards completion of the self-education training course to get a XX for your occupation as a XX and XX. However, you have incurred fully deductible, partially deductible and some not deductible costs.

However, you are not entitled to deduct costs for personal grooming items such as toiletries as these are always a private expense and not tax deductible.