Copyright © 2014 LexisNexis. This article is made available per the publisher's Content Sharing policy.With the advent of another tax year, the nature and form of self-education expenses come to mind. The income tax return for individuals makes a perceived distinction between forms of education for tax purposes but it may not be that clear for taxpayers and their advisers. Item D4 of the individual tax return allows for taxpayers to make a claim for work related self-education expenses that relate to formal qualifications from a school, college or university. The individual tax return implies that there is a distinction between formal self-education and informal self-education. However when one looks at the relevant Australian Tax Office (ATO) material, this distinction could easily be overlooked

Blissenden, Michael

Kenny, Paul

Xynas, Lidia

Flinders Academic Commons

Archived at the Flinders Academic Commons: http://dspace.flinders.edu.au/dspace/ ‘This is the peer reviewed version of the following article: Self-education expenses: some thoughts for taxpayers and their advisers (2014) 1(4) TAX 80which has been published in final form at https://advance.lexis.com/api/permalink/2dd25f5d-55ec-4876-944f-65097fd8a743/?context=1201008&federationidp=SFHJ6R50981Copyright © 2014 LexisNexis.  This article is made available per the publisher's Content Sharing policy.  Self-education expenses: some thoughts fortaxpayers and their advisersMichael Blissenden UNIVERSITY OF WESTERN SYDNEY, Dr Paul Kenny FLINDERSUNIVERSITY, Sylvia Villios UNIVERSITY OF ADELAIDE and Lidia Xynas DEAKIN UNIVERSITYWith the advent of another tax year, the nature andform of self-education expenses come to mind. Theincome tax return for individuals makes a perceiveddistinction between forms of education for tax purposesbut it may not be that clear for taxpayers and theiradvisers. Item D4 of the individual tax return allows fortaxpayers to make a claim for work related self-education expenses that relate to formal qualificationsfrom a school, college or university. The individual taxreturn implies that there is a distinction between formalself-education and informal self-education. Howeverwhen one looks at the relevant Australian Tax Office(ATO) material, this distinction could easily be over-looked.In Taxation Ruling TR 98/91 the ATO states2 that“self-education includes courses undertaken at an edu-cational institution (whether leading to a formal quali-fication of not), attendance at work related conferencesor seminars, self-paced learning and study tours”. How-ever, TR 98/9 also discusses the operation of s 82A ofthe Income Tax Assessment Act 1936 (Cth) (ITAA 36),which limits the amount of self-education expensesotherwise allowable under s 8-1 of the Income TaxAssessment Act 1997 (Cth) (ITAA 97). This requires anunderstanding of the specific application of s 82A which,of itself, is not an easy task. As has been pointed out byBoccabella, s 82A is a deduction denial section, regard-less of the heading that reads “Deductions for expensesof self-education”.3In TR 98/9 the ATO also states4 that if self-educationexpenses are allowable under s 8-1 but also fall withinthe definition of “expenses of self-education” in s 82A,the section operates to limit the amount of expensesotherwise allowable under s 8-1.In that context, expenses of self-education, which isitself defined within s 82A, rather than in the definitionsection of s 6 of the ITAA 36, states that these areexpenses necessarily incurred for or in connection witha prescribed course of education (not including a studentcontribution amount). A prescribed course of educationrefers to an organised course of study full-time orpart-time provided by schools, colleges or universities.Accordingly, s 82A operates in such a way that the first$250 of a prescribed course of education is not deduct-ible.So, in the context of preparing a tax return, anindividual that is claiming expenses of self-education isrequired to include such expenses at item D4 of theirindividual tax return. This then highlights to the ATOthat the individual taxpayer has made a claim, which issubject to s 82A of the ITAA 36. On this basis, the ATOwill be able to apply the denial for expenses of self-education as prescribed by s 82A or will have expectedthat the taxpayer has made the relevant calculation of theprescribed denial of deduction. On the other hand, wherea taxpayer has a claim for informal self-education, thiswill be made at D5 on the tax return, being other workrelated expenses.5 These costs include work-relatedconferences or seminars, the cost of professional andtrade journals, textbooks or airfares incurred on overseasstudy tours, on work related conferences or seminars, orattending an educational institution.From a practical perspective, a taxpayer still needs tobe able to identify the differences between expenses ofself-education, as contemplated by s 82A of the ITAA36, prior to making a claim in their tax return. It isimperative that taxpayers and their advisers are carefulas to the understanding of what is meant by work-relatedself-education given that the difference has not beenmade clear in TR 98/9. That ruling outlines the circum-stances in which self-education expenses are allowable.This is spelt out in Part A and Part B. Under the heading“Part A”,6 the ATO sets out the circumstances in whichself-education expenses are allowable. Under the head-ing “Part B”,7 the ATO sets out the manner in whichs 82A of the ITAA 36 operates to limit the amount ofexpenses otherwise allowable under s 8-1 of the ITAA97. The problem is that para 25 confuses the situation fortaxpayers. Paragraph 25 states that if self-educationexpenses are allowable under s 8-1 (which seems to bea reference to Part A of the ruling) but also fall within thedefinition of “expenses of self-education” in s 82A of theITAA 36, this section actually operates to limit theamount of expenses otherwise allowable under s 8-1 ofthe ITAA 97.australian tax law bulletin September 201480Reading para 25, it would seem that it is saying thatself-education expenses under Part A of the ruling(which covers self-education generally) are also “expensesof self-education” for s 82A of the ITAA 36, and thattherefore s 82A will operate to limit the availablededuction. The use of the same term “self-educationexpenses” (for Part A purposes of the ruling) and then“expenses of self-education”, which has a distinct mean-ing, only for s 82A purposes, therefore requires thattaxpayers and their advisers need to be very careful as tothe application of the various provisions in both theITAA 36 and the ITAA 97.Indeed, this leaves both taxpayers and their adviserswith the very difficult task of actually determining whatis meant by the term “self-education expenses” forincome tax purposes. The rejection of the previousfederal government reforms to self-education deductionlimits8 by the current federal government does very littleto clarify the existing position. The rejection of thecapping of self-education expenses actually just main-tains the status quo which, as discussed above, is adifficult and complex position.The actual application of s 82A of the ITAA 36 tothose self-education expenses covered by that section isalso a very difficult task. Section 82A only operates todeny a deduction for those expenses that are in respect ofs 8-1 of the ITAA 97. Note that this doesn’t actuallymean that the self-education expenses have to be allow-able under s 8-1, but only that they have to be allowablewith respect to the operation of s 8-1. That is, theexpenses have to be deductible with respect to self-education expenses for s 8-1 purposes (incurred for thepurposes of producing assessable income), but couldalso be non-deductible expenditure for s 82A purposes.So, there could be self-education expenditure incurredby a taxpayer, such as child-minding expenditure on theuniversity campus while the taxpayer undertakes theirstudy, which is relevant to their income production. Thisis self-education expenditure, however it will not bedeductible under s 8-1(2)(b) as it is a private expense.However that expenditure can nevertheless be used toabsorb the $250 denial aspect of s 82A and the taxpayercan then claim all of their deductible self-educationexpenses. In addition, if there are self-education expensesthat are governed for deductibility purposes other thans 8-1, then s 82A will have no operation. Such expenseswould include computer repairs, depreciation of equip-ment and car expenses using the cents per kilometremethod.The above discussion illustrates that there are manypitfalls for taxpayers and their advisers when making aclaim for expenses of self-education. The most criticalaspect is to recognise that the term “self-education” hasdifferent meanings for s 8-1 of the ITAA 97 and s 82Aof the ITAA 36. Once it is established which type ofself-education expenditure the actual expenditure fallsunder,9 then it will be necessary to determine what canactually be used to absorb the $250 deduction denial thatis prescribed by s 82A. The above also shows that it istime that the legislature took a look at repealing s 82A.Section 82A’s role is actually more applicable to a timewhen a rebate was claimable for self-education expenses.Those days have truly been left behind. Indeed, s 82Aserves no useful purpose and its continual presenceactually confuses taxpayers and their advisers.This article was subject to an independent review.Michael BlissendenAssociate Professor of LawUniversity of Western SydneyM.Blissenden@uws.com.auwww.uws.edu.auDr Paul KennyAssociate Professor Taxation LawFlinders Business SchoolFlinders Universitypaul.kenny@flinders.com.auwww.flinders.com.auSylvia VilliosLecturerAdelaide Law SchoolUniversity of Adelaidesylvia.villios@adelaide.edu.auwww.adelaide.edu.auLidia XynasAssociate Head of SchoolFaculty of Business & LawDeakin Universitylidia.xynas@deakin.edu.auwww.deakin.edu.auFootnotes1. ATO, TR 98/9: Income tax: deductibility of self-educationexpenses incurred by an employee or a person in business17 June 1998, available at http://law.ato.gov.au.2. Above, n 1, at [5].3. D Boccabella “$250 deduction denial for expenses of self-education: Retention of section 82A is a mystery” (2008) 37Australian Tax Review 164.4. Above, n 1, at [25].australian tax law bulletin September 2014 815. D5 of the Individual Tax Return covers all other work relatedtax expenses but that includes conferences, seminars and thelike that are related to the production of assessable income.6. Above, n 1, at [12]–[24].7. Above, n 1, at [25]–[30].8. Treasury Reform to Deductions for Education Expenses: Dis-cussion Paper May 2013, available at www.treasury.gov.au.9. Either D4 or D5 of the Individual Tax Return.australian tax law bulletin September 201482

Self-education expenses: some thoughts for taxpayers and their advisers

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Self-education expenses: some thoughts for taxpayers and their advisers

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