Private ruling: Self-education expenses
Date of advice: 9 March 2016
Published: May 2016
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Are you entitled to a deduction for the costs associated with undertaking some subjects in the course? | Yes.

Relevant facts and circumstances: You are currently employed. You intend undertaking a course. Your plan to start this course soon and the course will carry forward for 18-24 months on a part-time basis.

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

Reasons for decision: Summary: 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. In addition, 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 his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist. In your case, you will undertake a course and are employed. The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current duties and certain subjects in the course. Accordingly, you are entitled to a deduction for the costs associated with these subjects. | Detailed Reasoning - Note: 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 the Tax Office website at www.ato.gov.au | Detailed Reasoning - Expenses you can claim: Provided there is sufficient connection between your course and employment at the time you incurred the expense, the following self-education expenses are allowable tax deductions: • tuition fees, including fees payable under FEE-HELP (this does not include expenses paid under HECS-HELP) • FEE-HELP is a loan for eligible fee-paying students enrolled at an eligible higher education provider or Open Universities of Australia • self-education expenses paid with your OS-HELP loan • OS-HELP is a loan which helps students meet airfares, accommodation and other travel expenses while undertaking some of their study overseas • textbooks, professional and trade journals • stationery • photocopying • computer expenses • student union fees • accommodation and meals, only when participating in your course requires you be away from home for one or more nights • running expenses if you have a room set aside for work-related study purposes - such as the cost of heating/cooling and lighting that room while you are studying in it, and • allowable travel expenses. | Detailed Reasoning - Specific expenses: Computer expenses You can claim a deduction only for the work-related study portion of expenses of: • the interest on money borrowed to finance the cost of a computer • the cost of repairing a computer, and • the decline in value (depreciation) of the cost of your computer. Apportioning expenses If you did not use your computer solely for self-education purposes, you will need to apportion the claim between private and work-related study use. Interest on borrowings You can claim the interest on a loan where the funds are used to pay for deductible self-education expenses. Decline in value (depreciation) You can claim decline in value expenses on the following items if they are used for work-related study purposes: • computers • professional libraries • desks and chairs • filing cabinets and bookshelves • calculators • technical instruments and tools, and • other equipment (such as desk lamps). • Accommodation and meals The day-to-day costs you incur relating to your accommodation and meals is generally a private, non-claimable expense. You may claim the cost of accommodation and meals only when: • you are participating in work-related study, and • you are required to be temporarily away from home for one or more nights. Home study expenses If you have a room set aside for work-related study purposes, you may be able to claim decline in value of (and repairs to) your home office furniture and fittings, as well as a portion of the heating, cooling, lighting and cleaning representing the period you use the room for work-related study. Alternatively, you can use a fixed rate of 26 cents per hour of usage instead of keeping individual costs for heating, cooling, lighting, cleaning and decline in value of furniture for that room. Travel expenses When you use a car or public transport, you can claim the cost of travelling from your: • home to your place of education and back, and • work to your place of education and back. | Detailed Reasoning - Specific expenses you cannot claim: You cannot claim a tax deduction for the following expenses: • self-education expenses such as tuition fees paid to an education provider by you or the Australian Government under HECS-HELP • the cost of accommodation and meals associated with day-to-day living expenses, and • repayments you make (whether compulsory or voluntary) on debts you may have under the following loan schemes • HECS-HELP • FEE-HELP • OS-HELP • SFSS.