Private ruling: Self-education expenses
Date of advice: 1 February 2016
Published: March 2016
Ruling period: Year ended 30 June 2016 Year ended 30 June 2017 Year ended 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for the self-education expenses associated with a post-graduate course? | A1: Yes. | Q2: Are you entitled to claim a deduction for the cost of domestic and overseas airfares to attend the residential components of the course? | A2: Yes. | Q3: Is the value of the scholarship you receive included in calculating your assessable income? | A3: Yes

Relevant facts and circumstances: You are employed. You have been accepted into a post-graduate course. The course consists of modules. Some modules consist of residential studies in Australia. Other modules involve overseas travel. You are required to pay for your airfares in Australia and overseas. You have been awarded a scholarship. The scholarship is awarded on the condition that you satisfactorily progress through the program and complete it in the prescribed time. The scholarship is not paid directly to you. Instead it is allocated as a tuition waiver in equal instalments across the program. You will use FEE-HELP to assist you in paying the course fees. There are no employment conditions related to the receipt of the scholarship. You have no affiliation with the provider other than undertaking the course. You will holiday leave whilst attending the residential components of the course. Your employer is not paying your course fees nor have you entered into a salary sacrifice arrangement to pay the fees.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 6-15 | Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 51-10

Reasons for decision: Summary: The costs associated with undertaking the course are allowable deductions as the course relates to your employment. The scholarship you receive forms part of your assessable income. Your self-education expense deductions are not reduced by amount of scholarship received. | Detailed Reasoning - Self-education expenses: 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 the circumstances under which self-education expenses are allowable as a deduction. 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 ( Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348). TR 98/9 also discusses the types of self-education expenditure that are considered to be allowable. These include, but are not limited to: • some course or tuition fees • books, journals and stationery • accommodation and meals where you are required to be away from home overnight in connection with a self-education activity, and • depreciation on a computer or laptop and internet access although only the study related usage proportion may be claimed. 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 have the necessary and relevant connection with the earning of your assessable income and are therefore deductible. Specifically, the full amount of the course fees is deductible as the scholarship which will be credited against the fees forms part of your assessable income (see discussion below). The use of FEE-HELP to pay for the course fees does not impact on the deductibility of the fees. The course fees are deductible in the financial year they are incurred. Airfares to attend the residential components of the course in Australia and overseas are deductible expenses. | Detailed Reasoning - Scholarship income: Section 6-5 of the ITAA 1997 provides your assessable income includes ordinary income derived directly or indirectly from all sources during the income year. However, if an amount is exempt income, it is not included in your assessable (section 6-15 of the ITAA 1997). In working out whether you have derived an amount of ordinary income, and when you derived it, you are taken to have received it as soon as it is applied or dealt with on your behalf. Therefore it is possible to have derived income without physically receiving it. Section 51-10 of the ITAA 1997 provides that if you are a full-time student at a university and receive a scholarship, bursary, educational allowance or educational assistance, then the amounts are exempt from tax. In your case, you have been awarded a scholarship whilst undertaking the course. The educational facility will apply the scholarship against the course fees. As you are employed and will undertake the course whilst on holiday leave, you are not considered to be a full-time student. It is considered that you will derive the scholarship amount as it will be applied on your behalf to reduce the fees associated with the course. Thus, the value of the scholarship forms part of your assessable income. The amount derived in each income year is equal to the reduction in the fees payable.