Private ruling: Deduction - education expenses
Date of advice: 25 November 2024
Published: 13 January 2025
Ruling period: year ended 30 June 2024 | year ending 30 June 2025 | year ending 30 June 2026 | year ending 30 June 2027
Date scheme commenced: 1 July 2023

Ruling: Q1: Will the education expenses associated with the director of the company be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.

Relevant facts and circumstances: The company operates a conveyancing business. Certain tasks in the conveyancing process necessitate the involvement of a solicitor, including: • Drafting and reviewing contracts of sale • Advising on property-related legal matters • Preparing and updating wills for clients who are undergoing property transactions, ensuring their legal affairs are in order. The company currently outsource solicitors to complete these tasks. The company director has enrolled in a Juris Doctor in Law (degree). The degree is a commonwealth supported place (CSP). The company intends to cover the cost of the director's degree. The degree will negate the reliance on outsourcing solicitors. The degree will allow the company's business to offer comprehensive legal assistance in areas related to conveyancing such as wills and probate.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 26-20

Reasons for decision: Summary: Section 8-1 of the ITAA 1997 allows a deduction for all expenses to the extent they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature or relate to earning of exempt income or a provision prevents you from deducting it. Course and tuition fees incurred in attending an educational institution are allowable under paragraph 8-1(1)(b) of the ITAA 1997 if at the time you incur the expense it is necessarily incurred in carrying on your business for the purpose of gaining or producing your assessable income. However, certain education expenses are specifically prohibited as a deduction under section 26-20 of the ITAA 1997. Specifically, under paragraph 26-20(1)(ca), you cannot deduct student contribution amounts paid to a higher education provider under the Higher Education Support Act 2003. This includes tuition fees for Commonwealth Supported Place's (CSP's) at a university or higher education provider. Whilst the degree undertaken by the company director could be considered to be necessarily incurred in carrying on your conveyancing business, the expense incurred is not an allowable deduction as it is a Commonwealth Supported Place and specifically prohibited as a deduction under paragraph 26-20(1)(ca) of the ITAA 1997.