Edited version of your written advice

Authorisation Number: 1012986494815

Date of advice: 21 April 2016

Ruling

Subject: Self-education expenses

Question

Are you allowed deductions for self-education expenses related to your Master of Business Administration degree?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commences on:

1 July 2013

Relevant facts and circumstances

You commenced a Master of Business Administration degree with the long term view of obtained a higher position with your employer.

You were employed in an ICT related position with a Government Department on a full-time fixed term contract.

You later received a promotion into a permanent ICT related position.

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 deductions 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.

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. In accordance with TR98/9, expenses of self-education will satisfy the requirements of section 8-1 of the ITAA 1997 if:

• a taxpayer's 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; or

• 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 their current income-earning activities into the future.

If neither of the above tests is satisfied, expenses of self-education will not be deductible if the study is to enable a taxpayer to get employment, to obtain new employment, or to open up a new income earning activity. This includes studies relating to a particular profession, occupation or field of employment in which a taxpayer is not yet engaged, or to a profession, occupation or field of employment not sufficiently connected to one in which a taxpayer is currently engaged. In such situations the expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income.

This is the case even if the taxpayer remains with the same employer. For example, in case Z1 92 ATC 101; AAT Case 7541 (1991) 22 ATR 3549, a public service clerk studying for a law degree later obtained a legal office position also in the public service. Such expenses of self-education were deemed to be incurred at a point too soon to be incurred in gaining or producing assessable income.

Consequently, if a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. In your case, it is considered that while the knowledge gained from the Master of Business Administration degree may be of some assistance in your current occupation as in the ICT related position, it has only an incidental relevance and limited application to your current income earning activities. It is considered that the subjects studied as part of the degree provided you with skills and abilities so far removed from those required in your current occupation, that any improvement or maintenance of the skills and abilities required for that employment would not be as a result of the subject matter studied, but rather as a result of the general exercising of the mind that occurs with all study.

Accordingly, it is not accepted that the course of study and subsequent abilities gained had the necessary and relevant connection to the skills required for your employment. Consequently, your self-education expenses are not deductible under section 8-1 of the ITAA 1997.