Private ruling: Self-education expenses
Published: September 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for self-education expenses for an overseas Masters course? | A1: Yes | Q2: Are you entitled to a deduction for expenses you incurred for accommodation, stationery materials, textbooks, statistics software program and second hand computer monitor and printer whilst studying overseas? | A2: Yes | Q3: Are you entitled to a deduction for expenses you incurred for your travel insurance? | A3: No

Relevant facts and circumstances: You are an Australian resident for tax purposes. You have been employed as an analyst with an investment organisation responsible for managing large amounts of monies. Your employer indicated its intention to invest more overseas and due to organisation changes you were required to step up the responsibilities in portfolio allocation duties. You were required to undertake formal studies to obtain further skills and knowledge requested in this area. You enrolled in a post graduate degree at a university overseas. The course is specifically aimed at enhancing the knowledge of all aspects of your particular field and was deemed ideal given the content of the course. In consultation with your employer you applied for leave to attend the course. Your employer agreed to a number of conditions to allow you to undertake your study overseas that included paid and unpaid leave, holding of your full-time position, continuance of employment service, part reimbursement of your course fees with conditions and agreeing to occasional work while overseas with their overseas office. The course was to obtain further skills to better do your existing job and the necessary knowledge to undertake new duties within the organisation while building an understanding of overseas markets and developing new relationships overseas for future investing for the organisation. Your employer understood the importance and value in you undertaking this course by outlining a possible impact on remuneration and possibly leading to a promotion. Since returning from your study leave you were promoted in recognition of the increased knowledge and skills. You have incurred course fees, textbooks, travel insurance, accommodation, stationery, printing and copying of materials, statistics software program and a second computer monitor and printer expense. You have documentation to support the expenses incurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 82A .

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 (TR 98/9) provides the Commissioner's view for the circumstances under which self-education expenses are allowable as a deduction. TR 98/9 provides that 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). 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. However, no deduction is allowable for self-education expenses if the study is designed to enable a taxpayer to open up a new income-earning activity, whether in business or in the taxpayers current employment. Such expenses of self-education are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; TR 98/9). In your case, there is sufficient connection between the course you have undertaken and your current income producing activities. You undertook the study to enhance your existing capabilities, skills and knowledge that are required in the performance of your current employment duties. Consequently, the self-education expenses incurred in undertaking this course have the necessary and relevant connection with the earning of your assessable income and are deductable under section 8-1 of the ITAA 1997. | Detailed Reasoning - Accommodation: Expenditure on accommodation and meals 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 states 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. As your accommodation expenses that you have incurred were in order for you to attend an educational institution, the expenses are in connection with a self education activity and you are entitled to claim a deduction for such costs. | Detailed Reasoning - Textbooks, stationery, printing and copying materials, statistics software program, second computer monitor and printer: Textbooks are generally used during the course of study and, in most cases, only in the year of purchase and are deductible in the year of purchase. Similarly the costs of stationery, printing and copying materials, statistic software program and computer and monitor are allowable deductions. | Detailed Reasoning - Travel insurance: Travel insurance policies usually cover items that are private in nature such as illness, loss of baggage, and theft or damage to belongings. For this reason you are not entitled to claim a deduction for travel insurance under section 8-1 of the ITAA 1997 as the expenditure is private. This is confirmed by ATO Interpretative Decision 2001/615 which deals with deductibility of travel insurance. You are not entitled to a deduction for your travel insurance as it is private in nature.