Edited version of your written advice

Authorisation Number: 5010055202361

Date of advice: 21 May 2019

Ruling

Subject: Self Education Expenses

Question 1

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

Answer

Yes

Question 2

Are you entitled to a deduction for rent while you were attending your studies in Country A during the academic year, under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 3

Are you entitled to a deduction for the portion of your course fees that relate to medical insurance and health service fees?

Answer

No

Question 4

Are you entitled to a deduction for the portion of your course fees that relate to obtaining the required visa under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997)?.

Answer

No

This ruling applies for the following periods:

Year ended 30 June 201C

Year ended 30 June 201D

The scheme commences on:

September 201B

Relevant facts and circumstances

You commenced employment as a Management Consultant with your employer on mid 201A.

During 201B, you went on a sabbatical to undertake a Master of Business Administration (MBA) at a University in Country A.

You remained officially employed on leave without pay with a professional development with your employer. The agreement stipulates that your employer would contribute financially, upon successful completion of the MBA.

Whilst undertaking their studies, you received an offer to complete an 8-week internship

You undertook the internship during the break between the 201C and the 201D academic years of the MBA.

The internship was permitted by your employer under the professional development agreement.

You incurred tuition expenses for the 201B/1C academic year.

You were required to pay student life fees during the academic year as part of your course expenses.

Your MBA course enrolment was contingent upon having appropriate Country A health insurance.

You have incurred rent in a shared apartment for the 201B/1C academic year

You maintained most of your personal effects and belongings in the Australian house, including where your postal address remained.

You returned to Australia for short periods during semester breaks

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

Income Tax Assessment Act 1997 section 900-115

Income Tax Assessment Act 1997 section 900-120

Reasons for decision

Summary

You are entitled to claim a deduction for under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for tuition fees, flight costs, text books, stationery expenses and accommodation expenses as these expenses have a nexus to your assessable income. You are however not entitled to claim for, insurance and your visa application as these expenses are 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 senior management consultant. Consequently, the self-education expenses you incurred while you were employed have the necessary and relevant connection with the earning of your assessable income and are allowable deductions under section 8-1 of the ITAA 1997.

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 an 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

Paragraph 24 of TR 98/9 provides that accommodation expenses would not be deductable 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 was to attend the university and was only maintained during the academic year. Therefore expenditure on accommodation is 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.

Health Insurance

Health insurance costs are generally considered to be a private expense. You are therefore not entitled to a deduction, under section 8-1 of the ITAA 1997, for your insurance expenditure as this is private in nature.

Visa

The purpose of obtaining a visa is to allow you to enter and stay in another country. The expense is not considered to be incurred in the course of gaining or producing your assessable income. Therefore, the expense is private in nature and is not an allowable deduction under section 8-1 of the ITAA 1997.