Edited version of private advice

Authorisation Number: 1052136940433

Date of advice: 13 July 2023

Ruling

Subject: Self education expenses

Question 1

Are your self-education expenses, detailed in Group A, incurred in studying Master of Business Administration (MBA) allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 2

Are your self-education expenses, detailed in Group B, incurred in studying Master of Business Administration allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

XX XXXX 20XX

Relevant facts and circumstances

You are currently employed as a full-time Research Officer and have been since XXXX 20XX.

You provided your employment contract that listed a summary of your duties you perform.

You currently hold a several degrees related to science academia.

You intend to commence your Master of Business Administration (MBA). The fees will be deferred using FEE-HELP as a full fee paying student.

You provided a subject outline and an explanation was also provided of how each subject is connected to your income earning activities.

You intend to continue to work as a Research Officer throughout the MBA course with the intention of continuing into more senior research roles during the course and following completion.

You have provided an explanation as to how each subject directly relates to your current employment.

The information has separated into two groups, Group A and Group B

You have provided that the MBA will improve your leadership, knowledge, and research acumen you need to perform your current role and likely result in an increase in income from your current employment.

You have supplied a letter from your employer endorsing your study and confirming the connection between the MBA and your current employment.

You will not be reimbursed or receive an allowance by anyone for expenses incurring in relation to your study.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Issue - Self-Education Expenses

Question 1

Are your self-education expenses, detailed in Group A, incurred in studying Master of Business Administration (MBA) allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

Yes. You are entitled to claim a deduction for the university fees you incur in undertaking the MBA, where there is a sufficient connection between each unit of study in Group A within the MBA and your current income earning activities. The units in Group A in the MBA will improve your leadership, knowledge, and research acumen you need to perform your current role and likely result in an increase in income from your current employment.

Question 2

Are your self-education expenses, detailed in Group B, incurred in studying Master of Business Administration allowable deductions under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Summary

No. You cannot claim a deduction for all of the university fees you incur in respect of the Master of Business Administration as there is an insufficient connection between certain units of study (Group B) and your role.

Detailed reasoning

Section 8-1 of the 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 Income tax: deductibility of self-education expenses incurred by an employee or a person in business, 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. Further, 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 their current income earning activities in the future, a deduction is allowable.

Self-education expenses are deductible under section 8-1 where they have a relevant connection to the taxpayer's current income-earning activities. Paragraph 42 of TR 98/9 explains that if a course of study is too general in terms of the taxpayer's income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist, meaning that no deduction for self-education expenses would be allowable.

No deduction is allowable for self-education expenses if the study is to enable the taxpayer to get new employment, to obtain new employment, or to open up a new income earning activity (whether that be in business or in the taxpayer's current employment). Further, 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.

Application to your circumstances

To determine whether circumstances exist that support your self-education deductions, it is necessary to determine whether there is a sufficient connection between you incurring your university fees and your current income earning activities. Whether such a connection exists is a question of fact and is to be determined by reference to all the facts in your case.

The MBA can be described as a postgraduate degree that focuses on the principles of business administration including management and entrepreneurship. We consider that you are not entitled to a deduction for your all of your self-education expenses incurred in undertaking the Master of Business Administration as there are several units of study that do not have the necessary connection against your income-earning activity. Instead, we have considered the connection that each individual unit of study within the MBA has to your current income earning activities. The majority of the units have a sufficient connection to your employment responsibilities. However, some units do not because they either have an indirect or casual link to your formal employment duties or the concepts taught in a unit do not relate to your current employment and are too general.

Conclusion

Subjects outlined in Group A have the necessary connection to your assessable income earning activities and are considered allowable deductions under section 8-1 of the ITAA 1997.

The subjects outlined in Group B do not have the necessary connection with the Taxpayer's income earning activities. They are considered only very generally related to the work activities. They were also undertaken at a point too soon to enable the Taxpayer to obtain new income streams, albeit with the same employer. Therefore, the subjects listed in Group B are not allowable deductions under section 8-1 of the ITAA 1997.

Additional Information

Section 26-20 of the ITAA 1997 outlines the availability of deductions in respect of certain student assistant programs. There is nothing in this section or any other taxation provision that precludes a deduction for course fees incurred where a taxpayer has obtained a loan for all or part of the fees for the course under FEE-HELP.

Accordingly, as you meet the requirements of eligibility for a deduction of self-education expenses and are a full-fee paying student; then a deduction for the course fees can be claimed in the financial year in which the expense is incurred. You incur deductible course or tuition fees when the debt becomes a legal obligation you need to pay back and not when you make a repayment. A course fee debt generally becomes a legal obligation when the financial census date passes.

The repayments you make to the Australian Government on your FEE-HELP debt are not an allowable deduction.

Further information on self-education expenses including how to calculate your claim can be found on our website ato.gov.au and entering quick code QC 72166 into the search bar at the top right of the page.