Private ruling: Self-education expenses
Date of advice: 24 February 2016
Published: April 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to claim a deduction for self-education expenses including airfares for a course of education held overseas? | A1: Yes | Q2: Are you entitled to claim a deduction for the following expenses? • Health services fee • Student health insurance (gold level) • Housing • Food • Personal expenses | A2: No

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: • the application for private ruling, • further information received via email You are currently employed in a particular position. You have been granted leave without pay to undertake a course at an overseas University, commencing mid-year 20XX and finishing mid-20XX. You will incur the following expenses: • Airfares • Tuition and accommodation expenses • Food and personal expenses • Books • Student health insurance and health service fees • Student, document and university facility fees You will be remaining overseas while undertaking the course. You will not maintain a residence in Australia while you are overseas. Your spouse will be accompanying you.

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 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. 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. In your case, it is accepted that the Masters 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. Airfares You have incurred airfare expenses in travelling overseas. As these expenses were incurred in undertaking the self-education, you are therefore entitled to a deduction for these costs under section 8-1 of the ITAA 1997. Accommodation, food, health services, student health insurance and personal expenses. Whilst overseas, 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 expenses will retain its 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 will be overseas for several months. You will be accompanied by your spouse and staying in an apartment. You will not be returning home or maintaining a residence in Australia while you are away. Therefore you are not entitled to claim a deduction relating to accommodation, meals and person expenses. In these circumstances, expenditure is private in nature and not allowable under section 8-1 of the ITAA 1997. Expenses such as student health insurance and health services fees are of a private nature and are therefore not deductible.