Private ruling: Self-education expenses
Date of advice: 7 July 2016
Published: August 2016
Ruling period: Year ended 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for self-education expenses in relation to undertaking your Masters of business administration (MBA) studies? | A1: No

Relevant facts and circumstances: You graduated at the end of 20XX and commenced work in your profession the following year. As part of your professional registration obligations you must undertake a minimum number of CPD hours per 3 year cycle. There are two types of CPD categories-Clinical (the practice of your profession) and non-clinical (other topics such as business, time management, financial etc). The non-clinical CPD hours are capped at 12 hours per year. You have undertaken various standalone CPD courses in the years you have been in this field. In 20XX you commenced a 4 year MBA course part-time.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 Taxation Ruling TR 98/9 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. | 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. | If a course of study is too general in terms of the taxpayer's current income-earning activities, the necessary connection between the self-education expense and the income-earning activity does not exist. The cost of self-improvement or personal development courses is generally not allowable, although a deduction may be allowed in certain circumstances. | In Case U101 87 ATC 616 the Administrative Appeals Tribunal (AAT) considered the deductibility of expenditure on personal development courses. Case U101 concerned a taxpayer who was employed as a Taxation Office inspector. He undertook a course on communication, clear self-expression and work organisation. The course was not formally recommended or encouraged by his employer but the taxpayer considered it would assist him to carry out his work more efficiently. | His Honour J Purvis denied the claim and held that there was not a sufficient nexus between the expenditure in pursuing the course and the taxpayer's employment. | In your case, you are in a particular field and you are undertaking a MBA. It is considered that there is an insufficient connection between the skills and knowledge required in your current duties and the course that you have undertaken. | Whilst the course may broaden your knowledge and professional skills, the courts have held that these reasons alone are not enough to demonstrate a sufficient connection between the expenses and your income producing activities. | The course is considered to be too general and is not regarded as being incurred in gaining or producing assessable income. Therefore, a deduction is not allowed under section 8-1 of the Income Tax Assessment Act 1997.