Private ruling: Deductibility of self-education expenses
Date of advice: 8 March 2018
Published: June 2018
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | A1: Yes.

Relevant facts and circumstances: You embarked on a relevant course at a University in foreign country A in association with the another university in foreign country B. When you enrolled and throughout the time you were studying, you were employed as a director with your employer, a company. You had responsibility for the internationally dispersed team and were on a Leadership Team of the Company. Enrolling in the relevant course was designed to improve your performance in both of these areas: ● by becoming a better manager of people; and, ● so you could understand the commercial implications of what the Leadership Team considered such as, acquisitions, entry into new markets and financial decisions. Enrolling in the relevant course included units to help you developed these areas. Your income rose after you started the relevant course: you were given stock bonuses, merit based salary increase, all of your eligible cash bonus and was awarded best Player in a region. Most of this was a direct result of the lessons you had learned in the relevant course. Accordingly, to the course increased your assessable income in the position you held at the time. Your employer did not pay any tuition costs, but did grant you significant leave to attend residential classes. The costs are for the course, accommodation, travel and the loan fees. You have supplied copies of invoices and other documents to substantiate your claims.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1936 Section 82A

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. Further, paragraph 26 of TR 98/9 states that expenses relating to self-education which are compulsory and unavoidable, as well as those for which a need can be shown in terms of fulfilling the requirements of the course, are regarded as being 'necessarily incurred' and are expenses of self-education. It is considered that the study will maintain or improve your skill or knowledge used in your current income earning activity. As a consequence, you have incurred compulsory fees and associated expenses. Consequently you are entitled to a deduction for the course fees incurred and associated costs. | Detailed Reasoning - Limitation on deductibility of expenses: Section 82A of the Income Tax Assessment Act 1936 operates to limit the amount of self-education expenses otherwise allowable under section 8-1 of the ITAA 1997. Only the excess of the self-education expenses over $250 may be considered for deduction under section 8-1.