Private ruling: Self-education expenses
Date of advice: 11 November 2015
Published: November 2016
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1July 2014

Ruling: Q1: Are you entitled to a deduction for your course expenses? | A1: Yes.


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. Self-education expenses are generally deductible under section 8-1 of the ITAA 1997 where they have the necessary connection to your current income earning activities. 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 ( 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 the taxpayer to get employment, to obtain new employment or to open up a new income earning activity, whether in business or in the taxpayer's current employment. If the studies relate to a particular profession, occupation or field of employment in which you are not yet engaged, the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income (FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541). In your case, it is accepted that the course maintains or enhances the skills that are required in the performance of your current employment duties. Consequently the expenses incurred for your self-education have the necessary and relevant connection with the earning of your assessable income and are therefore deductible under section 8-1 of the ITAA 1997. As such your course fees, stationary and some fuel costs as well as depreciation on your laptop are an allowable deduction. Even though you have a loan for your course fees under FEE-HELP, this does not preclude you from claiming a deduction for the expenses incurred in relation to the course. You are still entitled to a deduction under section 8-1 of the ITAA 1997 for course fees paid. However, paragraph 26-20(1)(cb) of the ITAA 1997 specifically prevents a deduction for payments made to reduce a debt to FEE-HELP loans. Fuel costs incurred in travelling between home and university or work and university are an allowable deduction. However if you travel from home to university and then on to work, only the cost of the first leg of the journey is deductible. Similarly, only the first leg of each trip is deductible where you travel from your workplace to university and then to home. Depreciation on your laptop is an allowable deduction under section 42-15 of the ITAA 1997.The deduction for depreciation should be apportioned based on the percentage of use for self-education purposes and the percentage used for private purposes. Further details on calculating your allowable depreciation deduction can be found in Guide to depreciating assets 2015 which can be found on the website at www.ato.gov.au. Please note that 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 at paragraphs 119 to 155 of TR 98/9, which can be accessed on our internet website at www.ato.gov.au.

Relevant facts: You are employed full time. | • participate in training and quality assurance activities, | • providing effective and appropriate advice to clients, | • manage departments when your manager is absent, and | You are a registered professional. | You are completing your studies part time and have completed some units. | You hope to finish your studies in the 2015-16 financial year. | The study gives you skills and knowledge for your employment position. | You employer provides you with flexible hours and flexible leave dates so you can attend the classes and complete exams. | After completing your studies you will receive an increase in your income from your current position. | You are incurring costs for course fees under FEE-HELP, stationary, laptop and fuel in relation to your studies.