Private ruling: Work-related self-education expenses
Date of advice: 7 August 2024
Published: 16 September 2024
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to claim a deduction for the work-related self-education expenses you incurred for your course? | A1: Yes. | Q2: Are you entitled to claim a deduction for the expenses you incurred including health and related services, medical insurance, international services charge, document fees and university services and support fees that were paid to the educational institution? | A2: No.

Relevant facts and circumstances: You are employed at Organisation A. You have been employed by Organisation A since XX/20XX. On XX/XX/20XX, your employer provided you with a written letter stating that they supported you to undertake a course at an educational institution and agreed to pay $XXXX towards your tuition fees. On XX/XX/20XX, you and your spouse took out a variable interest loan of $XXXX which was secured against your property and used to pay for the expenses you incurred for your course. On XX/XX/20XX, you purchased a flight to Country A to study your course at the educational institution. On XX/XX/20XX, you commenced studying your course at the educational institution. On XX/XX/20XX, Organisation A paid a portion of your tuition fees directly to the educational institution. A condition was that you returned to Organisation A for a minimum period or repay the amount pro rata. On XX/XX/20XX, you paid the educational institution $XXXX for tuition fees, international service charge, university services and support fee, student activity fee and document fee. On XX/XX/20XX, you paid the educational institution $XXXX for tuition fees, international service charge, university services and support fee and student activity fee. You chose to study units that were specifically related to your work at Organisation A. In the term one, you studied several units. In the term two, you studied several units. Organisation A expects you to pass on the knowledge and skills gained from the course in supervising and settling in junior staff and in internal seminars. Organisation A also expects you to promote your qualification in marketing efforts aimed to attract talent to Organisation A and compete for work against other organisations. Organisation A provided you with a leave of absence to undertake the course. You incurred the following additional expenses associated with studying your course: laptop computer laptop dock monitor keyboard mouse and textbooks. On XX/XX/20XX, you purchased flights to return to Australia upon completion of your course. On XX/XX/20XX, you graduated from your course at the educational institution. On XX/XX/20XX, you returned to your position at Organisation A. Your employment duties have not changed since you have returned. You undertook the course to enhance your knowledge and skills that you apply in your employment, to obtain a higher level of remuneration and to also improve your retention and recruitment value. You did not receive any government allowances or taxable bonded scholarships.

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

Reasons for decision: 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 2024/3 Income tax : deductibility of self-education expenses incurred by an individual 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). Similarly, if the study of a subject of self-education objectively leads to or is likely to lead to an increase in a taxpayer's income from their current income earning activities in the future, a deduction is allowable. TR 2024/3 states that subject to the general tests under section 8-1 of the ITAA 1997 being met, the following types of expenses relating to approved self-education are allowable deductions: Course or tuition fees to attend a work-related conference, seminar, or place of education. Professional and trade journals, digital subscriptions, and stationery. Airfares incurred to participate in self-education, provided you are not living at the location of the self-education activity. Interest incurred on borrowed monies where the funds are used to pay for deductible self-education expenses. Accommodation and meal expenses incurred where a taxpayer is away from home overnight for self-education expenses connected with income-earning activities. | Detailed Reasoning - Tuition fees: In your case, it is accepted that the LLM will maintain or enhance the skills that are required in the performance of your current role. Consequently, the self-education expenses incurred have the necessary and relevant connection with the earning of your assessable income. You are therefore entitled to a deduction for your tuition fees under section 8-1 of the ITAA 1997 for self- education expenses. You are not entitled to a deduction for the following expenses as they do not relate to your income earning activities: health and related services medical insurance international services charge document fee and university services and support fee | Detailed Reasoning - Textbooks: You purchased textbooks for the course of your study. Reference books and textbooks are generally used during the course of study and, in most cases, only in the year of purchase. In such circumstances, you can deduct the cost of the books under section 8-1 of the ITAA 1997.If you intend to use these textbooks as reference material for income- earning purposes, you can deduct an amount for the decline in value of the book's user section 40-25 of the ITAA 1997. | Detailed Reasoning - Airfares: You have incurred the expense of airfares in travelling to attend an educational institution related to your income earning activities, and you will therefore be entitled to a deduction for these costs under section 8-1 of the ITAA 1997. | Detailed Reasoning - Interest on borrowings: Interest incurred on money borrowed to pay for self-education expenses is allowable under section 8-1 of the ITAA 1997, where the interest expense has a relevant connection with the activities by which a taxpayer currently derives his or her assessable income. You and your spouse took out a variable interest loan in which a portion of the loan was used for the purpose of paying your tuition fees, course expenses and airfares. A deduction is allowable for the interest incurred on the loan for the funds borrowed that were used for an income producing purpose. As you and your spouse took out the loan in joint names, the deduction will need to be apportioned into the percentage of your share of the loan and the expenses that are considered to be allowable deductions. | Detailed Reasoning - Decline in value assets: If the subject of the self-education enables you to maintain or improve skills or knowledge or is likely to lead to an increase in income from your current income-earning activity, you can deduct an amount for the decline in value of the depreciating asset you use, or have installed ready for use, for self-education purposes. In your case, you purchased a laptop computer primarily for the purpose of your studies, and you can deduct an amount for the decline in value. | Detailed Reasoning - Limits to the deductibility of self education expenses: In certain circumstances you may need to reduce your allowable self-education expenses by $300. However, you may have other types of expenses some of which are not allowable as a deduction that can be offset against the $300 before you reduce the amount you can claim for allowable expenses. For more information, you can enter QC 72166 into the search bar at www.ato.gov.au.