(a)

The wording of the third dot point of paragraph 3 of the draft Ruling was too broad.

(b)

The words' We consider' should be removed from the first dot point of paragraph 6 of the draft Ruling as it has already been stated that the Ruling is the Commissioner's view on the application of the law.

(c)

In paragraph 20 of the draft Ruling, it would be more straightforward to state 'does not prevent a deduction' rather than 'does not necessarily preclude a deduction'.

(d)

The words 'The Commissioner considers' should be removed from paragraph 22 of the draft Ruling.

(a)

The final Ruling updates Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business which has been withdrawn. While we have not changed our view, the articulation of our view in the final Ruling has been modernised to make the principles clearer. The third dot point of paragraph 3 of the final Ruling replicates, in part, paragraph 5 of TR 98/9.

(b)

We agree. In the final Ruling, these words have been removed from the first sentence of the first dot point of paragraph 6.

(c)

We disagree. The meaning of the 2 phrases are different.

(d)

We agree. In the final Ruling, these words have been removed from paragraph 22.

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Expand Example 7 of the draft Ruling to clarify whether the outcome to the example would be any different if Kieran's existing duties were limited to only performing the role of a computer salesman and no role as an assistant manager. In other words, would Kieran still be entitled to claim the cost of his course if he was not an assistant manager because this would be opening up a new income-earning activity with his existing employer?

•

An example that incorporates the decision in Anders and Commissioner of Taxation [2023] AATA 1471. This could consider whether a deduction for self-education would be available where a teacher undertakes a course of study in order to expand the subjects that they are able to teach.

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An example of a bookkeeper working in an accounting practice who undertakes a Bachelor of Business in Accounting degree in order to expand the type of work undertaken in their existing employment.

•

An example where an employee accountant undertakes a course on superannuation so that they start servicing self-managed superannuation fund clients.

•

An example where an employee solicitor incurs expenditure to become a barrister by paying for the cost of a reader's course and the cost of sitting the bar exam.

The application of the principles and exclusions requires consideration of the specific facts and circumstances of each case and it is not possible to address every potential scenario in the Ruling. The final Ruling comprehensively sets out the relevant principles and provides explanations through text and examples of the application of the principles to particular fact patterns. Taxpayers or their advisors, applying the final Ruling, provided they take all relevant facts and circumstances into account, should be able to determine the deductibility of self-education expenses with confidence.

The wording in paragraphs 24 and 25 has been largely adopted from paragraphs 16 and 35 of TR 98/9. The addition of the summarised statement by the High Court in Commissioner of Taxation v Day [2018] HCA 53 (Day) at [29] updates those paragraphs. However, to avoid any possibility of confusion, and to ensure that paragraph 25 is abundantly clear, changes have been made in the final Ruling to the last 2 sentences in paragraph 25 to more clearly reflect the view in Day at [29].

Further, with regard to footnote 32 of the draft Ruling, consider whether specific reference to depreciating assets should be made rather than pointing the reader to Division 40 in a footnote.

The 'Note' contained in footnote 32 of the draft Ruling has been deleted in the final Ruling as it relates to the decline in value of a depreciating asset under Division 40, which is dealt with in a separate section of the Ruling.

The fifth dot point of paragraph 44 of the draft Ruling lists as a factor 'the self-education is something that leads to or is likely to lead to a promotion to a position which is not materially different from your current position'. Would this factor be satisfied if the self-education led to a promotion to a team leader.

Guidance on the concept of 'materially different' is provided by Deputy President Alpins in paragraph 30 of Ting where he states:

I accept the respondent's submission that the applicant's income-earning activities as a classroom teacher stand in contradistinction to those of a leading teacher, which is a management role. The evidence, including both the applicant's oral evidence and the departmental document to which I have referred, establishes that employment as a classroom teacher is materially different from employment as a leading teacher. Promotion to the position of a leading teacher does not merely constitute increased income for the same income-earning activities, rather it involves engagement in relatively new income-earning activities for the purposes of s 8-1. Put simply, it means more pay for doing a different job.

The other factors outlined in paragraph 44 of the final Ruling would also need to be considered as no one factor on its own will necessarily determine whether the self-education leads to, or is likely to lead to, an increase in your income from your current income-earning activities.

We do not consider that Example 7 of the Ruling contradicts the information contained in paragraph 44. The example provides that Kieran will be promoted to the position of manager (he is currently the Assistant Manager) in the same sales area. This is designed to demonstrate that the promotion is not materially different because, as Assistant Manager, he is already in the same area – which is consistent with paragraph 44 of the final Ruling.

However, to avoid any possibility of confusion, and to ensure that the example is abundantly clear, changes have been made in the final Ruling to paragraph 49.

At the moment, the draft Ruling somewhat addresses this issue in Examples 10 and 11, which make it quite clear that obtaining an industry placement or a casual or part-time job while undertaking a particular course of study does not make the cost of the course deductible (or any other self-education expenses deductible).

However, what needs further clarification is the situation where an individual starts a course full time, but part way during the course they obtain full-time employment and then continue their course part time. For example see the 'Tommy' example of the ATO's fact sheet – QC 20811 – Nurse and midwives – income and related deductions, under self-education expenses. The 'Tommy' example indicates that a deduction in these circumstances may be available from the time that an employee commences full-time employment in the same field as their course. It is recommended that this issue be addressed in the final Ruling.

It is noted that Example 32 of the draft Ruling appears to illustrate that an employee can be on unpaid leave, and the course fees can be deductible against other employment income, where the employer has agreed to a promotion upon course completion and return to work.

Example 32 of the draft Ruling was included primarily to demonstrate when meals and accommodation expenses incurred while undertaking self-education are not considered deductible. To avoid the possibility of confusion and to make this clearer, changes have been made in the final Ruling to now Example 34.

The concern with this sentence is that it may convey the wrong impression that these studies 'can' be tax deductible, even if they do not have a nexus to gaining or producing assessable income, as long as they 'can' be characterised as such. In the avoidance of unintended interpretation, the sentence could be rephrased as follows: 'The study is connected to his/her field of employment and is relevant in gaining or producing his/her assessable income'.

Further, the final Ruling could include an example, similar to Examples 17 and 18 of the draft Ruling which illustrates the apportionment principle in paragraph 80(a) of the draft Ruling. At the moment, although Example 17 illustrates this principle, it merely involves a game of golf and a sight-seeing tour. There should be an example involving a private stay over in relation to an interstate or overseas work-related conference, which is incidental to the main purpose of attending the conference (being the income-producing purpose).

Further, consider whether the draft Ruling should make some comment about whether airfares can be apportioned based on the number of days spent on work activities and the number of days spent on private activities. This is one of the most common issues raised by practitioners in relation to airfares, and it would appear that the Tribunal in recent times has not favoured an apportionment approach based on the time spent on work-related and private activities. For example, see Case R13 86 ATC 168 and Lenten and Commissioner of Taxation [2008] AATA 281.

Further, we do not consider it necessary to provide additional examples under the 'Airfares' section of the final Ruling to demonstrate these principles. These different factual scenarios are dealt with adequately under the apportionment examples where self-education expenses are stated to include airfares (for example, see Example 18 of the final Ruling).

We do not consider it necessary for the final Ruling to make comment about whether airfares can be apportioned based on the number of days or time spent on work activities versus private activities. The apportionment principles in paragraphs 81 to 95 of the final Ruling are sufficient in stating that self-education that has distinct and several parts (however this is determined) can be apportioned – see paragraph 83 of the final Ruling.

Further, in relation to Case R13 ATC 168 and Lenten and Commissioner of Taxation [2008] AATA 281, the question of deductibility and also apportionment needs to be answered taking into account the facts of the case. An apportionment based on time may not have been favoured by the Board of Review and Administrative Appeals Tribunal in those cases because it was not considered appropriate on the facts. Instead, it appears the Board of Review and Administrative Appeals Tribunal sought to apportion using a 'purpose' basis which is endorsed by paragraph 83 of the final Ruling and is not inconsistent with the examples in the final Ruling.