Edited version of private advice

Authorisation Number: 1051748576071

Date of advice: 05 October 2020

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self-education expenses?

Answer

Yes

This ruling applies for the following periods:

Income year ended 30 June 2020

Income year ending 30 June 2021

Income year ending 30 June 2022

Income year ending 30 June 2023

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are undertaking Master of Business Administration (MBA) through a University. You commenced this course in 2020 and aim to complete the course in 2022.

The required subjects are:

·         Fundamentals of Leadership

·         Marketing Management

·         Economics for Management

·         Management Contemporary Organisation

·         Strategic Management

·         Managing Contemporary Organisational.

·         Strategic Management

·         Research for Decision Makers

·         Enterprise Projects

·         Project Management (Elective Subject).

You were granted recognition for prior subjects completed as part of the due to completion of an accountant's program.

You are not receiving any government allowance to study (including Austudy or Youth Allowance).

You are not receiving any scholarships.

You are not receiving an allowance or being reimbursed for your expenses in relation to your study.

You are paying for the course fees using FEE-HELP.

You are undertaking the MBA due to noticing that some skills that are expected of professionals in your area not covered by the previous study you had undertaken. Upon completion of your undergraduate degree, you have worked for two businesses which provided outsourced financial management services to clients and have recently transitioned to an internal forecasting role at Corporation A. In this time, you have also completed all learning modules required for the accountment's program, with the practical experience component being complete in November 2020.

While the accountant's program has provided you with an excellent foundation for the of the requirements of managing the financial and accounting side of the business, you have seen both thorough your previous roles and through your recent experience that, while business may be driven by financial goals, the skills and attributes required of professionals and leaders are much more varied. For example, during your time at Corporation B, a previous employer, you assisted in developing strategies for your clients to achieves their financial goals was more than financial, with your support role extending to operations, HR management and project management. Being able to drive success for your clients meant developing skills and solutions in all these areas with the goal of being able to link these additional areas to their financial gaols and support the client's success.

You feel the completion of an MBA would provide you with the right skills and knowledge set to supplement that that which you have developed through your recent experience. Your experience has shown you that the expectation of professionals is to have more broad-ranging knowledge that just their area of expertise. The variety of areas covered by the MBA will augment the strong financial background gained through your experience and prior education and allow you to grow and make impactful positive decisions that benefit both yourself and your employer.

You have been employed on a permanent full-time basis at Corporation A and a Financial Planning & Accounting Analyst 2019.

As per your description of why you are undertaking the course, you have found that your current role beyond simply understanding and communicating financial results, and the financial impact of decisions. In order to be effectively able to effectively create interpret a financial plan for the organisation, you need to understand the different aspects of the business, including an understanding of the different projects, and of the functional parts of the business as well. In addition, once a forecast been completed, often the next step in the process is assisting in managing aspects of the business to guide their performance against the forecast that has been developed. To complete this role more effectively, you will require more general knowledge about the various aspects of the business.

Your employer is supportive of your study to a point. They are happy you are undertaking the course, however, they provide no financial support or leave. You take annual leave when you require more than an hour away for work. Where required, your employer does allow you to work flex times to accommodate any classes with hours that clash with your normal work hours.

You have not changed positions or role since undertaking the MBA. As per the position description for your current rile, your specifically responsibilities include, but are not limited to:

• Produce monthly management reporting for the company: monthly financial reports, results file, monthly operations review packs, leadership team finance reports, and functional overhead reports.
• prepare financial metrics and analysis of financial performance of company business including forecasting and analysis of full year forecast against the budget and prior period.
• Meeting reporting deadlines monthly/quarterly/ annually in accordance with the Finance Calendar.
• Process enhancements by effectively leveraging the potential of core financial finance systems.
• Support the development of functional overheard budgets.
• Reconciliation of bookings and backlog reporting.
• Prepare ad hoc and other analysis as requested.
• Travel may be required to fulfil the requirements of their role
• Other duties as deemed to program and operational requirements and within the technical competency of the position.

Your primary reason for undertaking the studies is to build on the skills you are using daily in your current role, however, you feel that developing these shills assist in obtaining a Senior Financial Planning & Accounting Analyst role.

The expenses you expect to incur in undertaking this course are:

• Course fees - currently $X, invoiced three times each year.
• Textbooks - varying in cost but usually approximately $X.
• Minor stationery, computer consumables, home office running costs (including internet access), and travel expenses between work and in-person classes. These expenses will be incurred in an ongoing manner throughout each subject.

You consider the expenses allowable as they your current rile is based on the exercise of specific knowledge and the course you are undertaking allows you to improve that knowledge and that understanding and applying the subject matter covered in the course will likely lead to an increase in income you receive for your current role.

Reasons for decision

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.

The Commissioner's view on the deductibility of self-education expenses is contained in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business. The ruling explains that, provided there is sufficient connection between a course of self-education and current income earning activities, you are entitled to claim a deduction for your self-education expenses.

However, as stated in paragraph 15 of TR 98/9, such expenses will not be deductible if the study is intended to:

• Enable you to get employment.

• Enable you to obtain new employment.

• Open up a new income-earning activity (whether in business or in your current employment).

In your case it is not considered to be opening up a new income-earning activity as you are completing the master's degree in order to assist your current job as well as allowing you to obtain promotion on your current line of work.

FEE HELP

You are entitled to claim a deduction under section 8-1 of the ITAA 1997 for expenses you incurred for the course fees as the expenses directly relate to your current income earning activities, even though you have obtained a loan for the payment of those fees under FEE-HELP.

The deduction is claimed in the income year in which the expense is occurred, that is, when a you are liable for the expense. This is the time the costs are incurred by you and therefore, the date on the university's invoice is the date used when claiming these expenses.

The payments of FEE-HELP are re-payments of a loan used to pay the fees and are not deductible.

Conclusion

It is accepted that your MBA will maintain or enhance the skills that are required in the performance of your employment. Your self-education expenses are considered to have the relevant connection to your current income earning activities. Therefore, expenses incurred in relation to your MBA course, including the course fees, are considered allowable as a deduction under section 8-1 of the ITAA 1997.

Limitation on deductibility of expenses

Section 82A of the Income Tax Assessment Act 1936 operates to limit the amount of self-education expenses otherwise allowable under section 8-1 of the ITAA 1997. Only the excess of the self-education expenses over $250 may be considered for deduction under section 8-1. Therefore, your claims will need to be reduced by $250 for each income year that you make a claim for self-education expenses.

Note: some travel for journeys can't be claimed, but you may be able to offset the cost of these journeys against the $250 reduction. For more information, go to www.ato.gov.au and search quick code QC 31970 or self-education expenses.