Private ruling: Self-education expenses
Date of advice: 8 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you able to claim a deduction for a portion of the costs you have incurred to undertake occupation related subjects in a course as eligible self-education expenses? | A1: Yes. | Q2: Are you able to claim a deduction for any portion of the costs you have incurred to undertake non-occupation related subjects in a course as eligible self-education expenses? | A2: No.

Relevant facts and circumstances: You are a full-time employee in a position that includes significant accounting responsibilities. You also study a business course part-time. Under a scheme available at your work, your employer covers half your course fees. Your course fees are not paid through HECS-HELP, that is, you are not in a Commonwealth supported place. Half the subjects you studied in the relevant financial year were business related and half were related to religion. You incurred costs relating to the business and religious text books. You have also incurred costs for student services and amenities fees Your employer has provided a letter of support for your studies in your current role.

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 Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses . In accordance with TR 98/9, expenses of self-education will satisfy the requirements of section 8-1 of ITAA 1997 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 ( FC of T v. Finn (1961) 106 CLR 60; (1961) 12 ATD 348) (Finn's Case); or • 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 ( FC of T v. Hatchett (1971) 125 CLR 494; 71ATC 4184; (1971) 2ATR 557 ( Hatchett's Case). Therefore, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses. The types of expenses related to self-education which are considered to be allowable under section 8-1 of the ITAA 1997 include: • course or tuition fees of attending an educational institution (including student union fees, but excluding Higher Education Loan Program (HELP) payments and course fees paid through HECS-HELP), • the cost of text books, • airfares, accommodation and meal expenses incurred on a study tour. | Detailed Reasoning - Application to your circumstances: In your case your employment position includes significant accounting responsibilities and you are undertaking a business course. You are undertaking a full fee paying course, rather than one that is Commonwealth supported, that is, your course fees are not paid through HECS-HELP. It is considered that there is sufficient nexus between some of your self-education expenses and your income earning activities. However, some of the subjects you studied do not have that necessary connection. It follows that consideration must then be given to the individual subjects you studied in that year. It is accepted that the business subjects have a sufficient nexus to your income earning activities. In contrast, the religion based subjects do not have the required connection with your job description to be considered an eligible self-education expense, as you are not in the profession of religious instruction, counselling or teaching. As such, the costs associated with these subjects are not an allowable expense. | Detailed Reasoning - Text books: The same consideration must be applied to the costs of your text books. The business texts are considered to have the same connection to your income earning activities as the subjects they relate to and therefore are an allowable expense. The religion based texts are not considered to have sufficient connection to your current income earning activities and therefore, are not an allowable expense. | Detailed Reasoning - Apportionment: As your employer is covering some of the course fees payable, consideration must now be given to the apportionment of this assistance. You have provided student account statements for the 2013/14 financial year showing a general credit adjustment amounting to 50 percent of your course costs for each semester. Therefore, as there is no evidence to demonstrate the intended apportionment of the employer assistance, it must be considered that the employer assistance funded 50 percent of each of the four subjects you studied in that year. It is the Commissioner's view that only two of the four subjects you studied in the year ended 30 June 2014 were considered to be eligible subjects for the purpose of claiming self-education expenses. Therefore, applying the apportionment discussed above, it follows that your eligible self-education expenses for the year ending 30 June 2014 are: • 50 percent of the costs of your two business subjects • 100 percent of the costs of your business texts • 50 percent of your student services and amenities fees Whilst it is acknowledged the college has not provided assistance in the costs of your student services and amenities fees, the apportionment has been calculated on the basis that only two of the four subjects you undertook in that year are eligible subjects, therefore, the above fees have been apportioned accordingly. | Detailed Reasoning - Further information: 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 on how this provision operates is provided in paragraphs 119 to 155 of TR 98/9.