Private ruling: Self-education expenses
Date of advice: 25 August 2015
Published: August 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for your course fees or any portion of your rent expenses? | A1: No. | Q2: Are you entitled to a deduction for self-education expenses other than course fees and rent? | A2: Yes.


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) states that you can deduct from your assessable income any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income, except where the loss or outgoing is of a capital, private or domestic nature. 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 ( Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348). Taxation Ruling TR 98/9 also states that 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. In your case, it is accepted that the post graduate course helped or will help maintain or enhance the skills required in the performance of your employment duties both with your previous employer and your current employer. Consequently the course has the necessary and relevant connection with the earning of your assessable income. However, not all expenses related to the course are deductible. | Detailed Reasoning - Course fees: Course fees paid through HECS-HELP are specifically excluded from being deductible by section 26-20 of the ITAA 1997. | Detailed Reasoning - Rent: For an expense to constitute an allowable deduction, it must be shown that they were incidental or relevant to the production of the taxpayer's assessable income ( Ronpibon Tin NL & Tong Kah Compound NL v. Federal Commissioner of Taxation (1949) 78 CLR 47; (1949) 4 AITR 236; (1949) 8 ATD 431). 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. TR 93/30 states that the following factors indicate whether an area of the home has the character of a place of business: • the area is clearly identifiable as a place of business • the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally • the area is used exclusively or almost exclusively for carrying on a business • the area is used regularly for visits of clients or customers. Where an area of a home is used in connection with work related study a deduction is only allowable for the running costs and the amount that is allowable 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 such as 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. If the items are used only partly for study then only a portion of the decline in value will be allowable. More information about calculating deductible running expenses can be found in TR 93/30 which is available on our website ato.gov.au | Detailed Reasoning - Types of allowable self-education expenses: Apart from running expenses in relation to an area of the home used to study, other types of allowable self-education expenses include the cost of text books and certain travel undertaken to attend the educational institution. Further information about the types of allowable self-education expenses can be found in TR 98/9 which is also available on ato.gov.au | Detailed Reasoning - $250 reduction: The self-education expenses you can deduct may be subject to a reduction of up to $250 in accordance with section 82A of the Income Tax Assessment Act 1936 . An explanation of how this provision operates in relation to working out your self-education expenses is provided at paragraphs 119 to 155 of TR 98/9.

Relevant facts: You currently hold a Bachelor degree and work in the field that you studied. | Until recently you were employed by an organisation in a position in the field that you studied. You were utilising the skills that you acquired in attaining your bachelor degree. | You have recently commenced full-time employment with another organisation also in a position in the field that you studied. You are utilising the skills that you acquired in attaining your bachelor degree. | You are undertaking postgraduate studies to enhance your skills in the area that you previously studied. | The course fees are paid under HECS-HELP. | Both your previous employer and current employer have said that you would be eligible to an increased level of pay on completion of your studies. | You undertake study at your home.