Private ruling: Self education expenses
Date of advice: 21 October 2016
Published: February 2017
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for tuition fees for the course? | A1: Yes. | Q2: Are you entitled to a deduction for travel expenses associated with the self-education? | A2: Yes, but only for certain trips. Refer to reasons for decision. | Q3: Are you entitled to a deduction for the cost of a computer monitor and software associated with the self-education? | A3: Yes. | Q4: Are you entitled to a deduction for home-office related costs? | A4: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1936 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). We accept that the self-education expenses incurred in undertaking this program 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 - Tuition fees: You have incurred the course fee expenses through FEE-HELP which was introduced by the Commonwealth to provide assistance to students who are not supported by the Commonwealth to pay course fees. As you have met the requirements for eligibility for a deduction for self-education expenses, the whole course fee is deductible. However, you are not allowed a deduction under section 26-20 of the ITAA 1997 for the repayment of FEE-HELP debt. | Detailed Reasoning - Travel expenses relating to self-education: Paragraph 160 of TR 98/9 provides that a deduction is allowable for motor vehicle and travel expenses in connection with a course of education in the following situations: ● the cost of travel between home and the place of education and then back home ● the first leg of the trip, if a taxpayer travels from home to the place of education and then on to work (the cost of travelling from the place of education to work is not a self-education expense) ● the first leg of the trip, if a taxpayer travels from work to a place of education and then home (the cost of travelling from the place of education to home is not a self-education expense) ● the cost of travel between work and the place of education and then back to work. Put simply, when you use a car or public transport, you can claim the cost of travelling from your: ● home to your place of education and back, and ● work to your place of education and back. However, you cannot claim the cost of the last stage of your travel from: ● home to your place of education, and then to work ● work to your place of education, and then to your home. Travel from your home to the university and back home is considered to be a self-education expense. However when you travel directly from work to the university then home, only the first part of the trip from work to the university is considered an allowable self-education expense. | Detailed Reasoning - Computer monitor and software: In relation to your self-education you are entitled to claim a deduction for the decline in value for depreciating assets where the cost exceeds $300. Further, you can claim the expense for the purchase of equipment or technical instruments costing $300 or less. In this case you purchased a computer monitor which was less than $300. You are entitled to claim this expense in relation to your self-education. | Detailed Reasoning - Home office expenses: 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. The amount that is allowable is 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 (for example 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.

Relevant facts: You are an Australian resident for tax purposes. | You have recently completed a course of education. | The study was done in order to improve your performance in your current role. | You were lacking in some advanced skills in key business areas, which were requirements of the position. | In order to fill the knowledge gap and improve your skills, you decided to complete the course. | You did the course part time, in order to quickly implement the knowledge and skills learnt. | You were supported by your employer during the course with paid study leave as well as working while on breaks from university and exams. | You were a full fee paying student, and paid through the FEE-HELP arrangement. | The position was not subsidised. | You travelled to university from home directly on class days, as classes were in the evening. You also had to travel to university on some weekends for project team meetings. | You occasionally used public transport to travel from work to university. | You were required to purchase software and a computer monitor for the course. | You have apportioned usage of home utilities for work related purposes over the two years of the course.