Edited version of your written advice

Authorisation Number: 1013047968199

Date of advice: 7 July 2016

Ruling

Subject: Self-education expenses

Question

Are you entitled to claim a deduction for self-education expenses in relation to undertaking your Masters of business administration (MBA) studies?

Answer

No

This ruling applies for the following period(s)

Year ended 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commences on

1 July 2015

Relevant facts and circumstances

You graduated at the end of 20XX and commenced work in your profession the following year.

As part of your professional registration obligations you must undertake a minimum number of CPD hours per 3 year cycle.

There are two types of CPD categories-Clinical (the practice of your profession) and non-clinical (other topics such as business, time management, financial etc). The non-clinical CPD hours are capped at 12 hours per year.

You have undertaken various standalone CPD courses in the years you have been in this field.

In 20XX you commenced a 4 year MBA course part-time.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

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.

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.

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. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances.

In Case U101 87 ATC 616 the Administrative Appeals Tribunal (AAT) considered the deductibility of expenditure on personal development courses. Case U101 concerned a taxpayer who was employed as a Taxation Office inspector. He undertook a course on communication, clear self-expression and work organisation. The course was not formally recommended or encouraged by his employer but the taxpayer considered it would assist him to carry out his work more efficiently.

His Honour J Purvis denied the claim and held that there was not a sufficient nexus between the expenditure in pursuing the course and the taxpayer's employment.

In your case, you are in a particular field and you are undertaking a MBA. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties and the course that you have undertaken.

Whilst the course may broaden your knowledge and professional skills, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the expenses and your income producing activities.

The course is considered to be too general and is not regarded as being incurred in gaining or producing assessable income. Therefore, a deduction is not allowed under section 8-1 of the Income Tax Assessment Act 1997.