Edited version of private advice

Authorisation Number: 1052155613202

Date of advice: 1 September 2023

Ruling

Subject: Self education expenses

Question 1

Are you entitled to a deduction for course fees expenses incurred in association with completing a Master of Business Administration (MBA) at The University under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 2

Are you entitled to a deduction for airfares incurred in association with completing a Master of Business Administration (MBA) at The University under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 3

Are you entitled to a deduction for accommodation expenses incurred in association with completing an MBA at The University under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 4

Are you entitled to a deduction for meals expenses incurred in association with completing an MBA at The University under section 8-1 of the ITAA 1997?

Answer

Yes.

Question 5

Are you entitled to a deduction for in country sim card., vaccinations and health insurance incurred in association with completing an MBA at The University under section 8-1 of theITAA 1997?

Answer

No.

Question 6

Are you entitled to a deduction for iPad, case, pen, stationery and earplugs for lectures incurred in association with completing an MBA at The University under section 8-1 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following periods:

Year Ended 20XX

Year Ending 20XX

Year Ending 20XX

The scheme commenced on:

XX X 20XX

Relevant facts and circumstances

You discussed working and studying an MBA with Employer B when you were interviewed on XX X 20XX.

You accepted the offer of the MBA course on XX X 20XX.

You obtained employment with Employer A as a Study Manager on a temporary basis in X 20XX.

You changed your employment on XX X 20XX with a position obtained via XX Labour Agency with Employer B.

You ceased previous employment in XX 20XX and started the new (current) position at the same time.

The duties of the past position and the present position are the same.

The duties that you are undertaking are as follows:

•         Project management, operational improvement methodologies related to large scale operations.

•         Organisational Behaviour, organising and reorganising structure of your company and dealing with Personnel management issues, personal motivation the structure and restructuring to deal with problems.

•         Strategic level decision making

•         Dealing with strategic level work and decisions and setting and developing business cases on projects you lead.

•         Project Financial analysis

•         Corporate reporting and decision making at a corporate level

•         Corporate level analysis.

You changed employment at the very start of the MBA program on XX X 20XX working for Employer B who supported you to do the MBA by allowing you to work remotely and flexibly so that you can study.

Your role as a study manager aligns very closely to all the units of study you are undertaking at The University.

All units of study are closely linked to your current duties as a study manager where you require leaderships skills and people management skills along with skills to initiate large projects and teams that require the use of diverse stakeholder engagement.

You commenced your MBA in X 20XX which was supported by your employer, and you were given leave without pay to attend the units of study.

The study included several units.

You included with your private ruling application additional information regarding the units of study and how each of them relates to your income earning activity as a Study Manager.

You told us the following costs that you have incurred/will incur to complete the MBA.

Tuition has a total cost of approximately $XX, XXX.

Accommodation while in the Country A will cost approximately $XX, XXX.

Cost of flights to and from the Country A are expected to be $XX, XXX.

Meal cost $XXX.

iPad case pen and ear plugs cost $X, XXX.

You told us that the course is to be completed by 20XX Income year.

You will not be receiving any Austudy, Abstudy or an allowance in support of doing your course. You will incur the full expense of the MBA.

You will not be receiving a scholarship/bursary in relation to your study in the Country A.

You will be paying for the course fees directly out of your income with no loans or other financial support provided.

On completion of the studies, you hope to have a role in a similar field to what you currently have but at a more Senior level with an increased salary to match these skills.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

You are entitled to claim a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for tuition fees, flight costs, textbooks, stationery expenses, a iPad, meals and accommodation expenses as these expenses have a nexus to your assessable income. You are however not entitled to claim for your vaccinations or Health Insurances as these expenses are considered private and domestic in nature.

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 circumstances in which self-education expenses are allowable. 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.

When considering items that would be allowable as a self-education deduction consideration to the item being compulsory and unavoidable expenses, as well as those for which a need can be shown, are regarded as 'Necessarily incurred'. This includes expenditure on fares, travel and accommodation, as well as fees, books and equipment to the extent they are incurred in pursuing a prescribed course of education. The balance is between expenses needed to fulfil the requirements of the course and those related to the provision of items, etc., which may merely serve a useful purpose.

In your case, it is accepted that the course will maintain or enhance the skills that you require to perform your duties as a lead knowledge analyst. Consequently, the self-education expenses you incurred while you were employed by employer B a mining company have the necessary and relevant connection.

Course Fees, Textbooks, Stationery

TR 98/9 provides that course fees, textbooks, stationery costs incurred in attending an educational institution where there is a necessary and relevant connection with the earning of assessable income is allowable deduction under section 8-1 of the ITAA 1997. Therefore, the expenses you incurred for course fees, textbooks, and stationery costs relating to the study you undertook overseas are deductible self-education expenses.

Accommodation and Meals

Paragraph 24 of TR 98/9 provides that accommodation expenses would not be deductible under section 8-1 of the ITAA 1997, where the accommodation constitutes the establishment of a new home. You have maintained a residence in Australia with most of your belongings. You also intend to return to Australia. The purpose of the accommodation is to attend the university and is only maintained during your study at Country A University.

Therefore, expenditure on accommodation and meals are an allowable deduction under section 8-1 of the ITAA 1997 as you have not established a new home in Country A.

Airfares

Paragraph 111 of TR 98/9 further provides that airfares incurred on overseas study tours or sabbatical, on work related conferences or seminars or attending an educational institution are deductible under section 8-1 of the ITAA 1997. They are considered part of the necessary costs of participating in the tour or attending the conference or seminar or the educational institution.

Decline in Value - iPad

Paragraph 79 of TR 98/9 states you can deduct an amount for the decline in value of assets such as technical instruments and equipment, computers, calculators, professional libraries, filing cabinets and desks if the self-education satisfies the principles outlined in paragraph 13 and 14.

You can claim assets that cost more than $300 over the life of the asset (decline in value). However, if the asset costs $300 or less you can claim an immediate deduction for the full cost of the asset to the extent that you used it for study in the income year you bought it.

You must also reduce your deduction by the extent to which you use the asset for other than a taxable purpose.

Vaccinations and Health Insurances

The purpose of having vaccinations and getting Health Insurance are in preparation for you to go to another country. The expense is not considered to be incurred in the course of gaining or producing your assessable income. Therefore, these expenses are private in nature and are not an allowable deduction under section 8-1 of the ITAA 1997.

Connection to your current and future employment

The MBA will provide support for you to undertake projects management, operational improvement methodologies related to large scale operations.

The Organisational Behaviour unit of study provides information on personal motivation and how organisations can structure and restructure to deal with problems.

The unit Strategic Advantage focuses on strategic level decision making which you are currently dealing with strategic level work and decisions and the unit of study provides a framework for setting and developing business cases on projects you lead.

The MBA also provide financial analysis fundamentals which you use extensively in your role as Study Manager. The unit Corporate Reporting and Decision Making enhances your level of understanding of corporate level analysis as distinct from project level analysis

All units of study are closely linked to your current duties as a study manager where you require leaderships skills and people management skills along with skills to initiate large projects and teams that require the use of diverse stakeholder engagement.

Expenses

Tuition has a total cost of approximately $XX, XXX

Accommodation while in the Country A will cost approximately $XX, XXX

Cost of flights to and from the Country A are expected to be $XX, XXX

Meal $XXX

iPad case pen and ear plugs $X, XXX

You told us that the course is to be completed by 20XX Income year.

You will not be receiving any Austudy, Abstudy or an allowance in support of doing your course. You will incur the full expense of the MBA.

You will not be receiving a scholarship/bursary in relation to your study in the Country A.

You will be paying for the course fees directly out of your income with no loans or other financial support provided.

On completion of the studies, you hope to have a role in a similar field to what you currently have but at a more Senior level with an increased salary to match these skills.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1