Edited version of private advice

Authorisation Number: 1052364623992

Date of advice: 20 February 2025

Ruling

Subject: Deductions - self-education expenses

Question 1

You are entitled to claim a deduction for self-education expenses?

Answer 1

Yes.

This ruling applies for the following period:

30 June 20XX

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You were employed by the Employer in a senior management position.

Your employment was full time.

The start date of your employment with the Employer was XX XXXX 20XX. The end date was XX XXXX 20XX.

You left your employment with the Employer due to ongoing internal and external bullying and harassment. You were stood down from work on XXX leave.

There were aims to mentor you into eventually becoming XXX of the Employer. Post study, this did not eventuate due to extenuating circumstances in the company causing your departure.

On XX XXXX 20XX you received a letter from the Business School (BS) at the University offering you admission to undertake the Master of Business Administration (MBA) course. You accepted the offer. The offer includes these course details:

•                     You were to undertake the course in the 20XX intake.

•                     The course was delivered in X modules:

­        X modules were delivered over long weekends in Australia.

­        an international module involving travel overseas.

•                     You were a full fee-paying student.

•                     You used FEE-HELP for the payment of your course fees.

The MBA was within a broad business field, focused on executive level management in any business.

You undertook the course part-time with a X-day a month intensive structure across X months.

You negotiated to take study leave where you would still be paid by work but take X days off a month to attend X-day intensive study offsites. Additionally, you were paid study leave for X days for the international travel module. No leave was deducted by your employer during your studies.

Your claim for course fees is based on the amounts you owed less a part payment via scholarship.

The subject covered by the course:

•                     Subject list supplied.

You have provided a letter of support from the Employer dated XX XXXX 20XX regarding the connection between your employment and your MBA course. The letter lists your key responsibilities and the relevance of the MBA to them:

•                     Growing, supporting, and improving effective, inclusive, and sustainable ways of working to empower teams to get things done.

•                     Driving the Employer to become best in class through innovation.

•                     Driving internal project management practices within the Employer and promoting effective task completion across teams.

•                     Leading and supporting ongoing projects as well as other internal initiatives.

•                     Coaching and supporting operational and development strategy and processes across the Employer group.

•                     Enhancing the Employer's hybrid and asynchronous work models to ensure optimal productivity.

•                     Encouraging and facilitating collaboration and communication.

•                     In pursuit of professional development, the MBA program aligned with your responsibilities by enhancing your skills in leadership, strategy, and innovation.

•                     The knowledge gained from the MBA was directly relevant to the continuous improvement of operations, growth strategies, and sustainable business practices that were critical to your success in this position.

You were employed by the Employer for the entire time you undertook the MBA and completed the study before you left their employment. Your intention had been to continue with the Employer.

Included in your expenses claim are flights to and from a foreign country for the international study module.

The total deductions you are looking to claim are:

•                     $X for course fees.

•                     $X for airline flights to and from XXX for the international study module.

You have the documentary evidence to substantiate your claims.

You are not claiming a deduction for all modules you undertook, only those directly relevant to your role at the Employer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Reasons for decision

Summary

You are entitled to claim a deduction for your self-education expenses as they have the necessary connection to your income earning activity and you have the required evidence to substantiate your claim.

Your claim for the airfares incurred fulfil the requirements because they were incurred in connection with your self-education activities, and you weren't residing at the location of the self-education activities. Therefore, you are entitled to claim a deduction for these expenses.

Detailed reasoning

Section 8-1 of the Income Tax Assessment Act 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 2024/3 Income tax: deductibility of self-education expenses incurred by an individual (TR 2024/3) 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 (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.

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 (see Federal Commissioner of Taxation v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161; and paragraph 22 of TR 2024/3).

Airfares

Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual paragraph 125 states:

Airfares incurred to participate in self-education, provided you are not living at the location of the self-education activity, are deductible.

Airfares are deductible when the expense is incurred to participate in a course of self-education which is related to your income producing activities. However, if you move to a new place to live while undertaking a course of self-education, the nature of the airfares becomes private and personal as the nexus between the airfare and your earning of assessable income is severed.

Application to your circumstances

In your case you were employed by the Employer as a XXX XXX. While in their employment, you completed an MBA. You incurred costs for course fees and overseas airfares in the 20XX income year in relation to undertaking the studies.

You have demonstrated that the MBA would have deepened your understanding and capability in performing your role at the Employer. It is considered that the study would maintain or improve your skills and knowledge used in your income earning activity by enhancing your skills in leadership, strategy, and innovation as well as being directly relevant to the continuous improvement of operations, growth strategies, and sustainable business practices that were critical to your success in the position. This is supported by a letter from the Employer.

Further, there was the prospect of promotion and higher income as the Employer aimed to mentor you into eventually becoming XXX. However, this did not eventuate due to extenuating circumstances in the company causing your departure.

It is accepted that your MBA would maintain or enhance the skills that were required in the performance of your employment at the time it was undertaken. Your self-education expenses are considered to have the relevant connection to your income earning activities. In addition, you have the necessary receipts to substantiate your claims. Therefore, the expenses incurred by you in relation to your MBA course are considered allowable as a deduction under section 8-1 of the ITAA 1997 for the income year in which they were incurred.

Airfares

Your claim for the airfares incurred fulfil the requirements because they were incurred in connection with your self-education activities, and you weren't residing at the location of the self-education activities. Therefore, you are entitled to claim a deduction for these expenses.