Private ruling: Deductibility of self-education expenses
Date of advice: 16 October 2015
Published: October 2015
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | A1: Yes. | Q2: Are you entitled to claim a deduction for the travel to attend classes at the place of education? | A2: Yes in specific circumstances.

Relevant facts and circumstances: You are employed as a Support Analyst. You commenced your current employment several years ago. You commenced studying for a Graduate Diploma course which you expect to complete in the 2016 financial year. Your employer fully supports your education by providing fully paid study leave each year and reimbursing some of your education related expenses each year. Both you and your employer believe the course has an adequate connection to your current employment and improves the skills you require to perform your current job. You have not changed positions or employers since commencing the course. On most occasions you travel from work to home then travel to the place of education. However there are times when you travel from work to the place of education then home.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Detailed Reasoning - Detailed reasoning: Section 8-1 of the Income Tax Assessment Act 1997 states that you can deduct from your assessable income any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income, except where the loss or outgoing is of a capital, private or domestic nature. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses 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 ( Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348). TR 98/9 also states that 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, the self-education expenses are allowable as a deduction. In your case you are studying an MBA course. It is accepted that this course will maintain and enhance the skills that are required in the performance of your current employment activities. As there is the necessary connection between the course and your current income-earning activities you are entitled to claim a deduction for your course expenses under section 8-1 of the ITAA 1997. | 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. Your travel from your home to the place of education and back home is considered to be a self-education expense. However when you travel directly from work to the place of education then home, only the first part of the trip from work to the place of education is considered an allowable self-education expense.