Edited version of private advice

Authorisation Number: 1052335997687

Date of advice: 16 January 2025

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a partial deduction of X percent of costs for your overseas trip for self-education expenses under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) being accommodation costs of $XX, flight costs of $XX, self-education activities of $XX and transport costs of $XX associated with your overseas trip?

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

29 September 20XX

Relevant facts and circumstances

You are a teacher at a school.

You are the Head of Faculty and also have responsibility for teaching history.

Your role, as Head of Faculty, includes writing assessment and curriculum documents.

Your responsibilities include developing and updating curriculum documents to ensure they meet Australian Curriculum and Senior Schooling syllabus.

You design and implement assessment strategies to evaluate student performance.

You currently oversee and are writing curriculum offerings and assessment for the Australian Curriculum, Assessment and Reporting Authority.

You provide guidance and support to faculty members in their teaching practices including developing resources that support the curriculum delivery.

You took long service leave.

You took an overseas trip.

You travelled with your family.

You visited a number of overseas countries.

You visited museums and significant historical sites on an almost daily basis.

You visited other locations as well including Christmas markets and activities for your children.

You partook in approximately X self-education activities during your overseas trip.

You have provided a letter of support, from the principal, which suggests visiting museums and historical sites are of significant benefit to your current role and align well with targeted professional learning to support the college.

You have provided a list of the self-education activities undertaken.

You were not directed or requested by your employer to undertake the self-education activities.

The activities undertaken will not result in an increase in your salary.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Summary

No. Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities.

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual 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 (paragraph 22 of TR 2024/3). 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 their current income earning activities in the future', a deduction is allowable.

Detailed reasoning

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.

The High Court majority in Commissioner of Taxation v Payne [2001] HCA 3 said it is well established that these words are to be understood as meaning incurred '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.

The majority further stated that the meaning of 'in the course of' gaining or producing income was amplified in Ronpibon Tin NL v Commissioner of Taxation (Cth) [1949] HCA 15 where it was held that:

... to come within the initial part of [section 8-1] it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income, or if none be produced, would be expected to produce assessable income...

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual discusses the circumstances under which self-education expenses are allowable as a deduction.

Paragraphs 13 to 16 and 19 of the TR 2024/3 state:

13. To be deductible under section 8-1, expenditure must be able to be characterised as having been incurred in gaining or producing assessable income.

14. 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.

15. This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce your assessable income, or if none is produced, would be expected to produce your assessable income.

16. It is not enough to show only that there is some perceived connection, general link or causal connection between the expenditure and the production of your income. The expenditure must have a close connection to the performance of the duties and activities through which you earn your income. ...

19. Having the support or encouragement of your employer to undertake the self-education also is not, by itself, determinative of whether the expense is deductible.

Paragraph 28 of TR 2024/3 states:

Expenditure on an overseas study tour or trip has been found to be deductible in limited circumstances where the study tour or trip had the requisite connection to the income-earning activities at the time. Notable factors to demonstrate such a connection are

•                     devoting all of your time while overseas to the advancement of your knowledge relevant to your work

•                     the tour or trip is undertaken while you are employed in the relevant role

•                     the tour or trip was not recreational or general in nature, but rather showed a particular special circumstance to differentiate it from mere recreational satisfaction

•                     the tour or trip was requested or supported by your employer.

Application to your circumstances

Although the knowledge gained from your overseas trip may be of assistance to you in your current occupation, you have not objectively shown that there is a sufficient connection between the self-education activities undertaken on your overseas trip and your current income producing activities. A general link can be made, but the activities do not form an integral part of your core responsibilities as Head of Faculty at the school, with responsibility for teaching history. These expenses do not have a sufficient connection with your income producing activities. Therefore, you are not entitled to a deduction for self-education expenses as the benefits of your overseas trip are largely personal and private in nature, with the trip also being recreational in nature.