1051275458113 | Legal database

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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051275458113

Date of advice: 31 August 2017

Ruling

Subject: Self-education expenses

Question 1

Are you entitled to a deduction for the course fees and associated expenses incurred for undertaking a Master’s Degree?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are qualified as a engineer and have been working in a related industry for approximately X years.

You are a part of the operations leadership team.

Your role is focussed on managing personnel, work direction and showing leadership.

You are responsible for providing direction to the work scope of multiple teams and managing resources accordingly.

You participate in plant performance monitoring and trouble-shooting, project definition and execution, budget preparation, manpower planning and cost control.

You also align resources and facilitate technical communication amongst departments.

Your key job function is to coach and assist the national leaders and building their competency.

In order to be suitable for your current role, you need to possess leadership and the ability to build partnerships and team spirit. You also need to provide coaching and mentoring to national employees. You needed to have experience in coordinating execution of operating plans, planning major turnaround work and major expansion work in operating facilities.

Your superior has shown support by allowing you to adjust your roster to attend classes. Your superior has also stated that the study will help in your budget prioritisation leadership role within the business unit and provide an excellent basis for career development within the corporation.

You will be completing the Masters degree on a part-time basis while working full-time at your employer’s organisation.

You will be funding the full course fees and associated expenses yourself.

The core subjects covered in the MBA have been documented.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1.

Reasons for decision

Summary

It is accepted that the MBA or EMBA will help maintain or enhance the skills required in the performance of your current employment duties. Consequently either the MBA or the EMBA have the necessary and relevant connection with the earning of your assessable income and you are entitled to a deduction for the course fees and associated expenses incurred.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature, or relate to the earning of exempt income.

Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses 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.

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; (1961) 8 AITR 406).

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 (FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161).

In your case, the core subjects you will be studying in the MBA will enable you to improve leadership and budget prioritisation skills required in your current role. Since you are a part of the operations leadership team, the MBA has a sufficient connection to the duties in your current employment. You are entitled to claim a deduction for the course fees and associated expenses for either course.

Limit to the deductibility of self-education expenses

The self-education expenses you can deduct may be subject to a reduction of $250 in accordance with section 82A of the Income Tax Assessment Act 1936. An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR98/9.

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