1 Are you entitled to claim a deduction for unit A and B course fees under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?
1 Yes - you are entitled to claim a deduction for the course fee expenses as they have the necessary nexus to your current income earning activities. Question 2 Are you entitled to claim a deduction for the unit course fees under section 8-1 of the ITAA 1997? Answer 2 No. This private ruling applies for the following periods: Year ending X June 20XX. The scheme commenced on: X July 20XX.
You are an Australian resident for taxation purposes. You began full time employment (the role) at the company in XX 20XX. In XX 20XX, you commenced a course through a University in Australia. Commonwealth Assistance You are in receipt of FEE-HELP for the above-mentioned units. The total cost for the 3 units of study is $XX and is being funded through the FEE-HELP loan scheme. You are not in receipt of a scholarship, AUSTUDY, Youth Allowance or employer reimbursements. The company supports you undertaking the course by offering flexible working arrangements to allow balance between work and study. In the 20XX financial year, you received a performance based bonus of $XX which, you advise, represents a tangible increase in income directly linked to the improved skills and knowledge acquired through the course. You will continue in the role at the company once the course is completed. You are scheduled to graduate from the course in the 20XX financial year.
Income Tax Assessment Act 1997 section 8-1
Question Summary Detailed reasoning Nexus to employment Section 8-1 of the Income Tax Assessment Act 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 2024/3 Income tax: deductibility of self-education expenses incurred by an individual (TR 2024/3) 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 a taxpayer to open up a new income-earning activity, whether in business or in the taxpayer's 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; and paragraph 22 of TR 2024/3). TR 2024/3 states that the course or unit has to enable taxpayers to maintain or improve that skill. If the course or unit offers general or board learning outcomes such that it doesn't relate to a specific skill or special knowledge, the necessary nexus is not there (see Case No NT85/4912 and Commissioner of Taxation [1987] AATA 155). TR 2024/3 further states that having the support or encouragement of your employer to undertake the self-education also is not, by itself, determinative of whether the expense is deductible FEE-HELP fees
Course fees to attend a university or approved higher education provider are deductible only where you are enrolled in a full fee-paying place (where the government does not pay any part of your fees). You cannot claim a deduction for course fees in respect of a Commonwealth supported place (CSP). A CSP is a type of enrolment where the total cost of your study is split into 2 parts: • Subsidised amount - the Australian Government pays a subsidy directly to your education provider. This is not a loan and you do not pay it back. You cannot claim a deduction for the subsidised amount. • Student contribution amount - you pay the amount remaining, being the student contribution amount which you must pay by the census date either upfront or using a HECS-HELP loan, if you are eligible. HECS-HELP loans are repaid through the tax system once your income is above a certain threshold. You cannot claim a deduction for the student contribution amount you pay (either upfront or by way of a HECS-HELP loan).
TR 2024/3 states that a full fee-paying student using a FEE-HELP loan or a personal loan can claim a deduction for their course fees (where they are deductible) at the time they pay those fees using the borrowed money. They cannot claim a deduction for repaying the loan, either as part of their income tax assessment or as voluntary repayments. Application to your circumstances At the time of studying the unit, you were employed for the company and incurred costs associated with undertaking the study. To determine whether circumstances exist that support your self - education expenses being deductible, it is necessary to determine whether there is a sufficient connection between you incurring your expenses, and your income earning activities. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.
Although it is accepted that there is a vague nexus between the unit and your role as, the learning outcomes of the unit are such that they are too broad to satisfy the requirements under section 8-1 of the ITAA 1997. Distinguishable from the deductible units A and B contained in question 1 of this ruling, the unit does not operate to maintain or improve a specific skill or knowledge required for your role, rather it opens up a new income-earning activity owing to the broad nature of the learning outcomes. We acknowledge that your employer has provided flexible working conditions to allow a balance between work and study. However, as stated in TR 2024/3, employer support is not determinative of the expenses of a course being deductible. All the facts and circumstances must be examined objectively to determine whether there is a sufficient connection between the course and your employment.
It is accepted that a general link can be made as the unit can be relevant in explaining your work to some of your clients. However, the learning outcomes of the course do not form an integral part of your core responsibilities at the company which you have included above. To that end, the unit is not deductible.