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Ruling

Subject: Self-education expenses

Question

Are you entitled to a deduction for the university fees incurred to undertake a Masters degree?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commences on:

1 January 2010

Relevant facts and circumstances

You began working full time as an account manager at the start of the year.

You are undertaking study to complete a Masters degree.

You have completed subjects including project management and managing international risk.

Your employer confirms that your university degree enhances your ability to perform your role by teaching you project management skills and how to cope with, and mitigate risk.

Your employer has confirmed that your studies are highly relevant to your work and subsequent progression within the company.

You incurred university fees at the start of the year and are a full fee paying student.

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. 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.

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.

In your case, you are employed as an account manager. It is accepted that the Masters degree you are undertaking will enhance the skills required in the performance of your duties. Consequently, the self-education expenses incurred have the necessary and relevant connection with the earning of your assessable income.

You are therefore entitled to a deduction under section 8-1 of the ITAA 1997 for self-education expenses.

Limit to the deductibility of self-education expenses

In certain circumstances you may have to reduce your allowable self-education expenses by $250 in accordance with section 82A of the Income Tax Assessment Act 1936. However you may have other types of expenses some of which are not allowable as a deduction that can be offset against the $250 before you reduce the amount you can claim for allowable expenses. Further information on how to work out your self-education expenses is provided at pages 38 to 40 of TaxPack 2011 and paragraphs 119 to 155 of TR 98/9. This publication and ruling are available on the Tax Office website: www.ato.gov.au