Private ruling: Self-education expenses
Date of advice: 14 July 2017
Published: November 2017
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim the out of pocket course fees related to your study of Graduate Certificate? | A1: Yes. | Q2: Are you entitled to an immediate deduction for the cost of your laptop? | A2: No. | Q3: Are you entitled to a deduction for the decline in value of your laptop? | A3: Yes.

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You have completed a Graduate Certificate. You were employed as a manager at a company. You resigned from this position. You commenced employment at as the Manager at another company. You completed and graduated from your studies in mid-20YY whilst employed the second company. You purchased a laptop during the 20YY financial year to assist with your studies.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 40-25 | Income Tax Assessment Act 1997 section 40-30 | Income Tax Assessment Act 1997 Division 40

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 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). In your case there is a direct link between your studies and both your employment positions. Therefore a deduction for your out of pocket expenses relating to the fees you incurred for your study is allowable. Capital expenses The cost of your laptop is considered to be a capital expense. As a laptop is regarded as a capital asset, the purchase cost is capital in nature. Therefore no deduction is allowed under section 8-1 of the ITAA 1997 for the cost of your laptop. Section 40-25 of the ITAA 1997 allows a deduction for the decline in value (depreciation) of a depreciating asset you hold, to the extent the asset is used for a taxable purpose. A depreciating asset is defined in section 40-30 of the ITAA 1997 to be an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. A laptop is a depreciating asset for Division 40 of the ITAA 1997 purposes. A deduction for the decline in value is an allowable deduction where it is used for income producing purposes. As the laptop is used for private purposes as well, the depreciation amount needs to be apportioned accordingly. The Commissioner has issued Taxation Ruling TR 2017/2 Income tax: effective life of depreciating assets which lists the effective life of a laptop as being 2 years. For further details on how to calculate your allowable depreciation deduction, please see the Australian Tax Office’s Guide to depreciating assets which is available on the website ato.gov.au.