Private ruling: Work related expenses - self education
Published: June 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 22 June 2012

Ruling: Q1: Are you entitled to a deduction for your tuition fees and text book expenses incurred whilst undertaking a course overseas? | A1: Yes | Q2: Are you entitled to a deduction for your accommodation and meal expenses incurred whilst undertaking a course overseas? | A2: Yes

Relevant facts and circumstances: You are currently employed in Australia. You are paid on performance based increment levels. You are undertaking a course overseas to improve how you do your current job. By completing this course you will be improving your increment level which is the financial gain that you expect to achieve out of this course. Your employer has supported you to undertake this course. You will be undertaking a combination of leave from your current employment; however you are due to return to your position once the course is completed. The course will be based in three different cities overseas. You will not be receiving any allowances or reimbursements from your employer for the expenses incurred in undertaking this course overseas. You will be staying in student accommodation provided by the education institution and will essentially be living out of a suitcase. You own a house in Australia which you plan to move back into once the course is completed. Your partner and pet will be staying in Australia. Your partner will be maintaining your house whilst you are overseas. Due to the distance from your home in Australia, travels costs and limited time-off you are not planning on visiting regularly; however you will be coming home on occasions to visit your spouse throughout your time abroad.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1.

Reasons for decision: Summary: Self education 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. Taxation Ruling TR 98/9 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 course will maintain or enhance the skills that are required in the performance of your current employment duties. Consequently the self education expenses incurred whilst undertaking this course have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997. Accommodation and meals Expenditure on accommodation and meals ordinarily has the character of a private or domestic expense. However, there can be instances where these expenses can relate to a work-related activity. TR 98/9 explains that a deduction for accommodation and meal expenses related to a self-education activity are an allowable deduction, under section 8-1 of the ITAA 1997, to the extent that the expenses are incurred in gaining or producing your assessable income. In your case the accommodation and meal expenses that you incur, whilst studying overseas, are considered part of the necessary costs of attending the educational institution. Accordingly, a deduction is allowable for these expenses under section 8-1 of the ITAA 1997. Substantiation requirements You should note that although various self-education expenses are allowable under section 8-1 of the ITAA 1997, the substantiation provisions outlined in Division 900 of Part 5-30 of the ITAA 1997 apply. Substantiation means that although a taxpayer may have fulfilled the technical requirements for deductibility (such as the expense being incurred in producing assessable income under Section 8-1 of the ITAA 1997), the deduction will be denied unless the taxpayer can prove that the relevant expenditure was incurred and more importantly proved in the manner required under the substantiation provisions. Documentation substantiating your deductions should be retained by you for five years from the due date for lodging the income tax return for the income year the expenditure was incurred or, if where a return is lodged later, the date the return is lodged.

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