Edited version of private advice

Authorisation Number: 1052313189365

Date of advice: 9 December 2024

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for self-education expenses incurred in studying a Master of Laws (LLM)?

Answer

Yes.

Section 8-1 of the ITAA 1997 allows a deduction for a loss or outgoing to the extent that it is incurred in gaining or producing your assessable income provided it is not of a capital, private or domestic nature or incurred in gaining or producing exempt or non-assessable non-exempt income.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual states that self-education expenses are incurred in gaining or producing your assessable income if either or both of the following apply:

•         Your income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables you to maintain or improve that skill or knowledge.

•         The self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future.

In your case it is accepted that at the time you incurred the expenses, the study has a sufficient nexus to your income earning activities as it will improve the skills and knowledge you require to carry out those income earning activities.

Therefore, the expenses incurred for tuition fees paid are an allowable deduction under section 8-1 of the ITAA 1997.

However, section 82KZM of the Income Tax Assessment Act 1936 (ITAA 1936) contains rules which affect the timing of deductions for certain prepaid expenses. In particular, if the eligible service period is 12 months or shorter but ends after the last day of the year of income after the one in which the expenditure was incurred, section 82KZM of the ITAA 1936 applies and evenly spreads the deduction for prepaid expenses over the years comprising the eligible service period.

You paid the course fees in the 20XX-XX income year and the service period for your course starts in the 20XX-XX income year (DD MM 20XX) and ends in the 20XX-20XX income year (DD MM 20XX). Therefore, the course fees you incurred must be claimed and spread over the 20XX-XX and 20XX-XX income years. No deduction can be claimed for the fees in the 20XX-XX income year.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a senior lawyer.

You are currently completing a Master of Laws (LLM) at a university in Country B.

You paid the admission fees for the course in 2 instalments while you were employed as a senior lawyer. The payments took place in the income year before the course commenced.

You requested a leave of absence from your employer to complete the course. Your request took several months for your employer to consider.

After considering your request, your employer advised that they would not grant you a formal leave of absence, however they also advised you that they would be happy to re-employ you in the future pending budget and staffing considerations.

You resigned from your employment after receiving this advice.

You will complete the course in the income year after the course commenced.

During your employment, you undertook various roles and duties as a senior lawyer.

You are not receiving any Austudy, ABSTUDY or Youth Allowance to undertake this course of study.

You are not receiving any taxable bonded scholarships.

You are not receiving any allowances or being reimbursed by anyone for expenses incurred in relation to your study.

The course is not a HECS or PELS course.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1936 section 82KZM