Private ruling: Self-education expenses – executive master of business administration
Date of advice: 3 May 2018
Published: July 2018
Ruling period: Year ending 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you entitled to a deduction for course/tuition fees paid in connection with a self-education course at an overseas educational institution? | A1: Yes. | Q2: Are you entitled to a deduction for the cost of your airfares between Australia and the overseas educational institution? | A2: Yes. | Q3: Are you entitled to a deduction for the cost of text books? | A3: Yes. | Q4: Are you entitled to a deduction for the costs associated with a visa for a foreign country? | A4: No.

Relevant facts and circumstances: You are employed in a full time capacity. Your current employment position requires you to lead and manage teams across four continents. You are accountable for the development, implementation and maintenance of specific management capabilities to detect and respond to various threats and incidents within your organisation. You are enrolled in an Executive Master of Business Administration (EMBA) at an overseas educational institution. You believe that the EMBA will enable you to build a stronger base of knowledge in all areas of business management, including finance and economics which will help you to drive efficiency and growth in order to meet your financial and non-financial targets. Your goal is to strive to become a more effective leader by expanding your management skills which will allow you to remain relevant and impactful in your current position, as well as providing significant potential to enhance further leadership skills to support you throughout your career. You believe the EMBA will also enable you to progress towards further business strategy and improvement roles with your employer. Your employer has supported your decision to study and the program is in line with your current development plan and the company’s study leave policy. During the program you will remain in full-time employment and you will utilise your annual and paid leaves during the study period. You are not receiving any reimbursement or allowance from your employer or anyone else in relation to your study. You are funding your own self-education expenses. You will incur the expenses during the 2017-18, 2018-19 and 2019-20 financial years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 | Income Tax Assessment Act 1997 section 40-25 | Income Tax Assessment Act 1936 section 82A

Reasons for decision: Summary: It is accepted that the EMBA will maintain or enhance the management and leadership skills that are required in the performance of your current role. Consequently, your self-education expenses do have the necessary and relevant connection with the earning of your assessable income. You are therefore entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for certain self-education expenses as explained below. | Detailed Reasoning - Detailed reasoning: Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income, except to the extent that it is of a capital, private or domestic nature, or incurred in relation to gaining or producing your 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. Paragraph 13 of TR 98/9 states: If a taxpayer's income-earning activities are based on the exercise of a skill or some specific knowledge and the subject of self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. Self-education expenses incurred by a taxpayer will qualify for a deduction under section 8-1 of the ITAA 1997, if there is a sufficient nexus to the production of assessable income and the maintenance or improvement of a skill or some specific knowledge. Paragraph 23 of TR 98/9 provides that subject to the general tests under section 8-1 being met, the following types of expenses related to self-education are allowable: ● course or tuition fees of attending educational institutions; ● the cost of professional and trade journals, textbooks and stationery; ● airfares incurred on overseas study tours, on work-related conferences or seminars, or attending educational institutions. Course fees You have demonstrated that the program has a sufficient nexus to your current employment as outlined in TR 98/9. You are allowed a deduction for your course/tuition fees incurred in attending an educational institution under section 8-1 of the ITAA 1997. Airfares You will incur the expense of airfares in travelling between Australia and the overseas educational institution. You are allowed a deduction for airfares under section 8-1 of the ITAA 1997. Text books Reference books and text books are generally used during the course of study and, in most cases, only in the year of purchase. In such circumstances, you are allowed a deduction for text book costs under section 8-1 of the ITAA 1997. However, if you intend to use them for a number of years as reference material for income-earning purposes, you deduct an amount for the decline in value of the books under section 40-25 of the ITAA 1997. Foreign visa Section 8-1 of the ITAA 1997 allows a deduction for any loss or outgoing to the extent to which it is incurred in gaining or producing your assessable income however it will not be allowed if the expense is of a private or domestic nature. The courts have considered the meaning of 'incurred in gaining or producing assessable income'. In Ronpibon Tin NL v. Federal Commissioner of Taxation (1949) 78 CLR 47, the High Court stated that: 'For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words "incurred in gaining or producing assessable income" mean in the course of gaining or producing such income.' The cost of applying for a visa to enter a foreign country is considered private in nature. The expense was not incidental and relevant to your current employment duties and was not incurred in the course of gaining or producing your assessable income. You are not entitled to a deduction for the costs associated with your foreign visa under section 8-1 of the ITAA 1997. | Detailed Reasoning - Limit to the deductibility of self-education expenses: In certain circumstances you may have to reduce your allowable self-education expenses by $250 in accordance with section 82A of the Income Tax Assessment Act 1936 . An explanation on how this provision operates is provided at paragraphs 119 to 155 of TR 98/9.