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Edited version of your written advice

Authorisation Number: 1012829985793

Date of advice: 26 June 2015

Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for self-education expenses incurred in association with the attainment of a Masters of Business Administration (MBA)?

Answer

No

This ruling applies for the following period

Year ended 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

From 20XX till 20XX you worked for your previous employer in a particular field

In 20XX to 20XX you went to the overseas to pursue higher studies and enrolled in a MBA.

You were granted 12 months study leave to undertake this course.

After completion of your studies you resigned from your then employer and began a new position with a new employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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.

Taxation Ruling TR 98/9 discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities.

At paragraph 13, TR 98/9 states that if a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge, and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction.

Paragraph 15, TR 98/9 states that no deduction is allowable for self-education expenses if the study is to enable you to get employment, enable you to obtain new employment, or to open up a new income-earning activity.

This view is supported by the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 which established the principle that no deduction is allowable for self-education expenses if the study, viewed objectively, is designed to enable a taxpayer to get employment or obtain new employment. Such expenses are incurred at a point too soon.

In your case you enrolled in a MBA course overseas as this would help you take up a managerial position with your former employer. You were granted 12 months unpaid study leave from your then employer to complete your MBA. On completion of your course you resigned from then employer and began a new position with another employer. It is considered your self-education expenses were incurred at a point too soon to be regarded as incurred in gaining or producing income from your future employment. Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.

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