Private ruling: Self-education expenses
Date of advice: 11 November 2016
Published: March 2017
Ruling period: Year ending 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Are you entitled to a self-education deduction for the costs of the research materials? | A1: Yes. | Q2: Are you entitled to depreciate the devices? | A2: Yes

Relevant facts and circumstances: You are employed in the XY area. You are required to have knowledge of legal concepts, legal procedure, and specific knowledge of how to draft contracts and other legal documents. You commenced a relevant degree in mid 201X. You have deferred the course costs under the Supported program. You wish to claim expenses for devices and research materials.

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. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. In addition, 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 his or her current income-earning activities in the future, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer's current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist. In your case you have commenced a relevant degree to enhance your current skills and knowledge. The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current position as an XY consultant and the degree. The costs associated with the research materials are an allowable deduction and must be apportioned based on personal use. | Detailed Reasoning - IPad and MacBook: Division 40 of the ITAA 1997 provides that a taxpayer may be entitled to a deduction for the decline in value of a depreciating asset that is used during the income year for a taxable purpose. Taxable purpose includes the purpose of producing assessable income under subsection 40-25(7) of the ITAA 1997. Section 40-30 of the ITAA 1997 provides a definition of depreciating assets. They are assets that have a limited effective life and can reasonably be expected to decline in value over the time it is used. Subsection 40-80(2) of the ITAA 1997 provides that if a depreciating asset costs less than $300 an immediate deduction may be claimed to the extent that it is used for a taxable purpose during the income year in which the deduction is available. An immediate deduction is available if all of the following tests are met in relation to the asset: ● the cost does not exceed $300, and ● you use the item predominantly for the purpose of producing assessable income, and ● the item is not part of a set that you purchased in that income year where the total cost of the set exceeds $300, and ● the total cost of the item and any other identical or substantially identical item that you purchase in that income year does not exceed $300. In your case you purchased devices both of which were over $300 each. Therefore, you can claim a deduction for the decline in value of the devices, under Division 40 of the ITAA 1997. Please note that for any personal use you will need to apportion the amount that you claim for the decline in value of the devices.