Edited version of your written advice

Authorisation Number: 1051298812042

Disclaimer

You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.

Date of advice: 25 October 2017

Ruling

Subject: Self Education Expenses

Question 1

Can I claim self-education expenses at label Y other deductions for the role in the partnership?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2017

Year ended 30 June 2018

The scheme commences on:

DDMMYY

Relevant facts and circumstances

You are a partner in a partnership providing consultancy business since 2015.

Your partnership does consultancy work includes, stakeholder engagement advice, the development of communication plans, business development and marketing advice, the development and analysis of business plans, the preparation of board papers, and negotiations with regulators on behalf of clients.

You have stated the business is your primary source of income.

You have commenced a Master of Business Administration (MBA).

The Subjects studied include Accounting, Economic management and strategy, marketing principles, strategic analysis and consulting.

Your travel to a foreign country for your study tour does not extend outside this period, and this study tour is the sole purpose of your trip.

Your studies in a Master of Business Administration (MBA) will enhance you skills thereby improving the existing services provided and income potential.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1 and

Income Tax Assessment Act 1936 Section 82-A.

Reasons for decision

Self-education expenses generally fall for consideration under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). This section allows a deduction for losses and outgoings which are incurred in the course of gaining or producing assessable income, unless the losses or outgoings are capital, or are of a capital, private or domestic nature.

The general test is that there should be a clear connection between the expense and the gaining or producing of assessable income from a profession or employment. Consequently, it is necessary to determine the connection between the particular outgoing and the operations by which the taxpayer more directly gains or produces his or her assessable income (Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344 at 349-350; (1956) 11 ATD 147 at 148; (1956) 6 AITR 379 at 384; FC of T v. Cooper 91 ATC 4396 at 4403; (1991) 21 ATR 1616 at 1624; Roads and Traffic Authority of NSW v. FC of T 93 ATC 4508 at 4521; (1993) 26 ATR 76 at 91).

TR 98/9 provides that 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).

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.

Under section 8-1 of the Income Tax Assessment Act as a business you can make a deduction where, ‘it is necessarily incurred in carrying on a * business for the purpose of gaining or producing your assessable income.’ In your case the self -education expense relates directly to your role as a partner in a partnership. This would mean the tests required relate to business and not to your employment income as it relates to the income shown at income item 13 O instead of income item 1 for salary and wages.

Expenses related to your study tour

Expenses related to the study tour including travel costs undertaken as part unit MGMT5618 would be deductible as defined in subsection 82A(2) of the ITAA 1936. This is because you have stated there is private component to your travel and it solely relates to the completion of the requirements under the subject MGMT5618 as part of your MBA.

You have stated your partnership offers as a consultant can off a broad range of topics including the development of business plans, communication plans and negotiations with clients with regards regulations and the provision of stakeholder advice.

You will be undertaking a course in Master of Business Administration (MBA) including subjects in data driven decision making, economic management and strategy, Marketing principles and strategic analysis and consulting in the course of providing consultancy advice such as business development and marketing advice to the exploration and mining sector.

In your case, there is sufficient connection between the courses you will be completing and your income producing activities as your role as a partner in the partnership and business income. You have also stated that your distribution form the partnership is and will be your main source of income. Furthermore you have the qualifications will lead to an increased capacity and legitimacy to charge for your consultative services.

Accordingly you are entitled to a deduction for the costs associated with the masters of business administration course.

Additional information

The deduction for self-education as it relates directly to your role as partner in the partnership and should be shown at label Y, Other deductions under item income 13 instead of the usual D4.

In certain circumstances you may have to reduce your allowable self-education expenses by $250. 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.

ATO view documents

Taxation Ruling TR 98/9

Other references (non ATO view)

Federal Commissioner of Taxation v. Finn (1961) 106 CLR 60, (1961) 12 ATD 348).

Charles Moore & Co (WA) Pty Ltd v. Federal Commissioner of Taxation (1956) 95 CLR 344 at 349-350