Private ruling: Self-education expenses
Date of advice: 15 December 2016
Published: May 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are the costs of completing a university program overseas, associated travel costs and accommodation costs deductible as self-education expenses? | A1: Yes.

Relevant facts and circumstances: You participated in a university program overseas (the program). You are employed as an engineer. Your job responsibilities include improving current operational processes and business systems, administering projects based on calculated risks for financial returns and creating an atmosphere of innovation via an entrepreneur mindset. The program is designed to educate students about delivering value for the company by driving innovation. Your job responsibilities have increased and extended upon completion of the course. Your superior has provided a letter advising that the completed course is well-aligned to the company's business values and will add to your personal financial growth and has increased your responsibility as an employee. He also advised that your completion of recent projects portrayed your application of your education from the program.

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

Reasons for decision: Summary: Are the costs of completing a university program overseas, associated travel and accommodation costs deductible as self-education expenses? | Detailed Reasoning - Detailed reasoning: 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. Alternatively, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's current employment. Such expenses of self-education are incurred at a point too soon to be regarded as being earned during the course of producing their current assessable income. In your situation, part of your job includes the development and execution of new processes and driving associated projects as aligned with company business goals. In order to fulfil these duties, you need to demonstrate strategic thinking. You are required to focus on engaging employees through servant leadership and helping others identify opportunities. Some core activities of your role involve representing your department in engineering projects and coordinating small engineering projects. One key performance measure was evaluating whether you have maintained financial budgets within approved limits and approved invoices in a timely manner. The program was designed to educate students on learning how to put theory into practice by working in small teams on a real project. You would also have been guided by a communication coach to hone your presentation skills. Finance was one of the key frameworks which were taught. The program has been deemed to be relevant in maintaining or improving your skills and knowledge pertaining to your current job engineer because theory taught in the program could assist in maintaining or improving your strategic thinking when coordinating projects. Also, the communication skills honed in the program would assist you when your department in engineering projects and engaging employees. Finally, the skills learnt within the finance framework would be helpful for you to maintain financial budgets within approved limits. Your superior has advised that the added knowledge from the program has been applied in recently completed projects and leads to, or is likely to lead to, an increase in your income. The self-education expenses incurred in undertaking the program have the necessary and relevant connection with the earning of your assessable income. The costs in completing the program are deductible under section 8-1 of the ITAA 1997 as a self-education expense. Your associated travel costs such as airfares incurred in attending the program are deductible under section 8-1 of the ITAA 1997 according to paragraph 111 of Taxation Ruling TR 98/9. Paragraph 23 of TR 98/9 allows a deduction where a taxpayer is away from home overnight and incurs accommodation expenses in attending an educational institution. However, such expenses are not allowable if the taxpayer has established a new home at the institution. Accommodation costs are deductible under section 8-1 of the ITAA 1997 according to paragraph 88 of Taxation Ruling TR 98/9 since such costs are deemed to be necessary costs when participating in such a course such as the one you attended. We do not consider that you established a new home at the educational institution. Therefore, you are entitled to a deduction for the accommodation expenses you incurred while staying there.