Edited version of private advice

Authorisation Number: 1052192449453

Date of advice: 24 November 2023

Ruling

Subject: Self-education expenses

Question 1

Is the expenditure incurred in undertaking an MBA Advanced, for those subjects contained in Table 1, an allowable self-education expense in the relevant income years?

Answer

Yes. Your self-education expenses are deductible as it is accepted that the study meets the requirements as set out in Taxation Ruling 2023/D1 Income tax: deductibility of self-education expenses incurred by an individual, and the Commissioner is satisfied that your study has the relevant connection to your income earning activities.

Question 2

Is the expenditure incurred in undertaking an MBA Advanced, for those subjects contained in Table 2, an allowable self-education expenses in the relevant income years?

Answer

No. Your self-education expenses are not deductible as the study does not meet the requirements as set out in Taxation Ruling 2023/D1 Income tax: deductibility of self-education expenses incurred by an individual, and the Commissioner is not satisfied that your study has the relevant connection to your income earning activities.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You commenced employment as a Marketing Specialist XX XXX 20XX.

You became an Account Director on XX XXX 20XX.

You undertook study of an MBA Advanced on XX XXX 20XX.

No Austudy, youth allowance, taxable bond scholarship, allowances or reimbursements by anyone were used for the expenses you incurred in relation to your study.

You did not pay the course fees through the Higher Education Loan Program.

You incurred tuition fees during the 20XX income tax period from various subjects including:

A list of subjects listed under Table 1 and Table 2 was provided.

Table 1 consisted of subjects that taught the skills of business strategies and business management.

Table 2 consisted of a subject that focused on learning to use and managing software development.

A description of the subjects taken in the degree and how it connects to your employment was provided.

You undertook this course with the motive to get a better job in your field. You are planning to become Head of Marketing once you have completed your studies.

Your employer encouraged you to undertake the course as:

•         Any ideas you suggested that expanded their business development ideas would result in awards and salary increase.

•         If you increased the revenue by using the knowledge and skills obtained in your degree, you would get a big bonus as a result of this.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

To be deductible under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), expenditure must be able to be characterised as having incurred in gaining or producing assessable income.

Taxation Ruling TR 2023/D1 Income tax: deductibility of self-education expenses incurred by an individual, 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.

This means there must be a relationship, or close connection, between the expenditure and what it is that you do to produce assessable income, or if none is produced, would be expected to produce your assessable income.

It is not enough to show only that there is some perceived connection, general link or casual connection between the expenditure and the production of your income.

The expenditure must have a close connection to the performance of the duties and activities through which you earn income.

The reason or motive for undertaking the self-education is not determinative of whether the expense is incurred in gaining or producing assessable income.

Having the support or encouragement of your employer to undertake self-education also is not determinative of whether the expense is deductible

The Commissioner considers self-education expenses to be incurred in gaining or producing your assessable income if either or both of the following apply:

•         Your income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables you to maintain or improve that skill or knowledge

•         The self-education objectively leads to, or is likely to lead to, an increase in your income from your current income-earning activities in the future

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. 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 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, the subject in Table 2 does not have the relevant link because the subject is too general and lacks the established nexus connection with the current income producing activity for it to be deductible.

The subject itself focuses on learning to use and manage software development projects. The subject was not designed to maintain or increase the skills or specific knowledge required in the current role of Account Director.

While it may assist in obtaining a new income producing activity as a Head of Marketing in the company, it does not have a strong connection in assisting the current role of Account Director.

Conclusion

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

The subject outlined in Table 2 does not have the necessary connection with the Taxpayer's income earning activities. It is considered only very generally related to the work activities. The subject was 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 Table 2 are not allowable deductions under section 8-1 of the ITAA 1997.