Private ruling: Income tax - deductions - work related expenses - self education expenses- employer letter for connection
Date of advice: 21 August 2018
Published: October 2018
Ruling period: For the financial year ended 30 June XXXX | For the financial year ended 30 June XXXX
Date scheme commenced: 1 July XXXX

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

Relevant facts and circumstances: You commenced the Bachelor of Law degree in XXXX with the University in a Commonwealth Supported Place (CSP) position, out of personal interest. You were promoted to the role of Manager in XXXX. In this role you developed your employer’s policy framework. You undertook a unit in your law degree that was related to your work at the time. You provided a letter from your employer stating that the course of education you were studying was related to your position of employment. Your employer is supportive and flexible in your attendance at lectures, to complete assignments and undertake exams. You claimed self-education expenses of $x,xxx in the financial year ended 30 June XXXX and $x,xxx in the financial year ended 30 June XXXX. You incurred the following self-education expenses: ● travelling from work to university tutorials and library and returning to work ● taxi fares from your office to university for exams and return ● HECS-HELP course fees ● student amenity fees ● textbooks and stationary/printing ● parking at university ● use of paid recreation leave to study ● a home office that is a separate room in your home dedicated up to xx hours a week of study.

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

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. The Commissioner’s view on the deductibility of self-education expenses is contained in TR 98/9 Income Tax: d eductibility of self-education expenses incurred by an employee or a person in business . TR 98/9 sets out the circumstances in which a deduction for self-education expenses is allowable in accordance with the deductibility principles of section 8-1 of the ITAA 1997. In your case, it is accepted that the course maintained or enhanced the skills that were required in the performance of your employment duties in the position of Manager. Consequently the self-education expenses incurred from the commencement date of this position have the necessary and relevant connection with the earning of your assessable income, and are therefore deductible under section 8-1 of the ITAA 1997. | Detailed Reasoning - HECS-HELP tuition fees: Where self-education expenses are incurred through a CSP, and part of the cost of the course is covered by the Australian government through HECS-HELP, TR 98/9 explains at paragraph 24 that HECS fees payable are not an allowable deduction under section 8-1 of the ITAA 1997. | Detailed Reasoning - Travel Expenses relating to self-education: Paragraph 160 of TR 98/9 provides that a deduction is allowable for motor vehicle and travel expenses in connection with a course of education in the following situations: ● the cost of travel between home and the place of education and then back home ● the first leg of the trip, if a taxpayer travels from home to the place of education and then on to work (the cost of travelling from the place of education to work is not a self-education expense) ● the first leg of the trip, if a taxpayer travels from work to a place of education and then home (the cost of travelling from the place of education to home is not a self-education expense) ● the cost of travel between work and the place of education and then back to work. Put simply, when you use a car or public transport, you can claim the cost of travelling from your: ● home to your place of education and back, and ● work to your place of education and back. However, you cannot claim the cost of the last stage of your travel from: ● home to your place of education, and then to work ● work to your place of education, and then to your home. Travel from your home to the university and back home is considered to be a self-education expense. However when you travel directly from work to the university then home, only the first part of the trip from work to the university is considered an allowable self-education expense. | Detailed Reasoning - Home office expenses: As a general rule, any expenses incurred which relate to the use or ownership of a home will be of a private or domestic nature, and therefore not deductible under section 8-1 of the ITAA 1997. However, a taxpayer who carries on part of their employment related activities from home may be entitled to a deduction for part of the outgoings of the home. The type of deductions allowable depends if the home is being used as a place of business or a place of study (TR 93/30). The deductible expenses in respect of a home can be divided into two broad categories: ● Expenses relating to ownership or use of a home which are not affected by a taxpayer's income earning activities (i.e. occupancy costs). These include rent, mortgage interest, rates and house insurance premiums. ● Expenses relating to the use of facilities within the home (i.e. running costs). These include electricity charges for heating/cooling, lighting, and depreciation of furniture and furnishings in the office. Where an area of the home is a place of business, a deduction may be allowable for both occupancy costs (such as rent) and running costs. Where an area of the home is a place of study, a deduction is not allowable for occupancy costs; the only costs that may be deductible are running costs for the place of study. The amount that is allowable is restricted to any extra expenses incurred in connection with the study. You study at home and are therefore entitled to a deduction for the additional 'running expenses' associated with your study. However, you are not entitled to a deduction for occupancy expenses (for example a portion of your rent) as it is not considered that the area of your home that you use to study would constitute a place of business. The amount that you are entitled to claim for running expenses is the difference between what was actually paid for heating/cooling and lighting, and what would have been paid had you not studied at home. Your running expenses also include the decline in value of any office furniture that you own which is used for study. Alternatively, the Commissioner accepts a deduction calculated at the rate of 45 cents per hour for the time when you use the room exclusively for study related purposes. This rate covers home office running expenses for electricity and the decline in value of office furniture. In order to be entitled to claim home office running expenses at a rate of 45 cents per hour, you must keep a diary for at least a four week period to establish the study related use of the home office. It is not sufficient for you to state that you use your home office exclusively for study; you need to be able to substantiate your claim. | Detailed Reasoning - Car Parking: It is the Commissioner's view that a deduction is allowable for parking fees (but not fines) and tolls if the expenses are incurred by an employee while travelling: ● between two separate places of work; ● to a place of education for self-education purposes (if the self-education expenses are deductible); or ● in the normal course of duty and the travelling expenses are allowable deductions. | Detailed Reasoning - Student Amenity Fees: Where a taxpayer is entitled to deduct self-education expenses in respect of the course of higher education, because the expenses are work related, and the student services and amenities fee is imposed as a compulsory levy on students at the institution, the fee is incurred by the taxpayer in undertaking the course of study. | Detailed Reasoning - Textbooks, stationery and printing costs: Paragraph 23 of TR 98/9 states that subject to the general tests under section 8-1 of the ITAA 1997 being met, the cost of professional and trade journals, text books, printing and stationery are allowable deductions. | Detailed Reasoning - Use of paid leave to study: You are not entitled to a deduction for your leave that you use for study purposes. | 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.