Private ruling: Self-education expenses
Date of advice: 24 December 2020
Published: March 2021
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 all your self-education expenses associated with a course of education held overseas? | A1: No | Q2: Are you entitled to a deduction for the cost of your course fees and textbooks? | A2: Yes | Q3: Are you entitled to a deduction for the cost of your airfares? | A3: Yes | Q4: Are you entitled to a deduction for the cost of your foreign visa? | A4: No | Q5: Are you entitled to a deduction for the cost of your food and accommodation? | A5: No | Q6: Are you entitled to a deduction for the cost of your laptop and phone expenses? | A6: Yes | Q7: Are you entitled to deduction for the cost of the language course? | A7: No

Relevant facts and circumstances: You began employment in 20XX. In 20XX you applied to enter a degree through an overseas education provider. You were accepted into the course later that year. You were required to attend on campus which was in Country X and Country Y. Your employer approved a year of leave to complete the course. You were not reimbursed by your employer or provided an allowance relating to the study. You started the course at the beginning of 20XX. While overseas you rented a fully furnished apartment in Country X and then two separate fully furnished apartments in Country Y. Your accommodation in all apartments was shared with other students. Before leaving Australia, you were living with you partner and your parents. You travelled unaccompanied and your partner and parents stayed in Australia. You completed language lessons as it is a mandatory requirement for admission to the course. You returned to Australia twice during the study period. You purchased a laptop solely for study purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 900-115 | Income Tax Assessment Act 1997 Section 900-120

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 to the extent to which they are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 98/9 discusses the deductibility of self-education expenses. Paragraph 13 of TR 98/9 states: If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. Thus, self-education expenses incurred by a taxpayer will qualify for deduction under section 8-1 of the ITAA 1997, if there is a sufficient nexus to the production of assessable income and the improvement of a skill or some specific knowledge. 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 his or her current income earning activities in the future, a deduction is allowable. Paragraph 23 of TR 98/9 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 of attending educational institutions, conferences or seminars • the cost of professional and trade journals, textbooks and stationery • airfares incurred on overseas study tours, on work-related conferences or seminars, or attending educational institutions • where a taxpayer is away from home overnight or temporarily, accommodation and meal expenses incurred on overseas study tours, conferences or seminars, or attending an educational institution. In your case, it is accepted that the course 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 under section 8-1 of the ITAA 1997 for self-education expenses. | Detailed Reasoning - Course fees and textbooks: You have demonstrated that the course of education has a nexus to your current employment. Therefore, as outlined in TR 98/9 you are allowed a deduction for your course fees and textbooks incurred in attending an educational institution under section 8-1 of the ITAA 1997. | Detailed Reasoning - Airfares: You will incur the expense of airfares and visas in travelling to Country X and Country Y to attend an educational institution; you will therefore be entitled to a deduction for these costs under s 8-1 of the ITAA 1997. Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims. | Detailed Reasoning - Foreign visa: Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income however it will not be allowed if the expense is of a private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47, the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.' The cost of applying for a visa to enter a foreign country is considered private in nature. The expense was not incidental and relevant to your current employment duties and was not incurred in the course of gaining or producing your assessable income. You are not entitled to a deduction for the costs associated with your foreign visa under section 8-1 of the ITAA 1997. | Detailed Reasoning - Accommodation and food: Whilst in Country X and Country Y, you will incur accommodation, food and personal expenses. Expenditure on accommodation and food ordinarily has the character of a private or domestic expense. However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense. Paragraph 89 of TR 98/9 outlines: Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meals expenses incurred are deductible under section 8-1. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities. However, where it is considered that a taxpayer has established a new place of residence, the accommodation and food expenses will retain their private nature and will not be deductible. TR 98/9 states: The key factors to be taken into account in determining whether a new home has been established include: • the total duration of the travel; • whether the taxpayer stays in one place or moves frequently from place to place; • the nature of the accommodation, e.g., hotel, motel, long term accommodation; • whether the taxpayer is accompanied by his or her family; • whether the taxpayer is maintaining a home at the previous location while away. • The fact that the taxpayer did not maintain a home while away for an extended period was the decisive factor in characterising expenditure on accommodation and meals as private 'living expenses' in a series of Board of Review decisions: Case N13 13 TBRD (NS) 45; 10 CTBR (NS) Case 98; Case N16 13 TBRD (NS) 65; 10 CTBR (NS) Case 99; Case N19 13 TBRD (NS) 76; Case N20 13 TBRD (NS) 79; and • the frequency and duration of return trips to the previous location. In your case you were in Country X and Country Y over a period of approximately XX months. You were staying in long term accommodation. You returned to Australia only twice during course break periods. Therefore, you are not entitled to claim a deduction relating to accommodation, meals and personal expenses. In these circumstances, expenditure is private in nature and not allowable under section 8-1 of the ITAA 1997. | Detailed Reasoning - Laptop and mobile phone expenses: PS LA 2001/6 states that usage of electronic devices in relation to a course of self-education may be deductible where a nexus can be established between the device usage expenses and the income earning activity. However, any personal device usage (as well as by other occupants) must be considered when determining the work-related percentage. Paragraph 9 states the two primary measures that can impact on work component percentage include: • the time spent by the taxpayer using the device for work purposes compared to time spent by all occupants using the device for private purposes (time basis) and • data used for work purposes compared to data used for private purposes of all occupants (data basis). Where itemised accounts are not available, a reasonable estimate of work-related expenses, based on diary entries of usage over a period of one month, together with relevant paid accounts, will be acceptable for substantiation purposes. | Detailed Reasoning - Language course: The cost of study of a second language is not an eligible deduction as it was incurred in order to meet the mandatory criterion that would allow you to take part in the course, the costs were incurred at a point too soon and therefore lack the necessary nexus to your employment. | Detailed Reasoning - Prerequisites for deductions: The deductibility of any work-related expenses are subject to the substantiation rules as outlined in Division 900 ITAA1997. Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims. Pursuant to sections 900-115 or 900-120 of the ITAA 1997, these expenses must be substantiated by a document setting out the following: • the name or business name of the supplier of the goods or service, or asset • the amount of the expense, or the cost of the asset • the nature of the goods or service, or asset • the day the expense was incurred, or asset was acquired, and • the day the document was made out.