Private ruling: Self-education expenses
Date of advice: 26 September 2018
Published: November 2018
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you entitled to a deduction for your self-education expenses? | A1: Yes TR 98/9 provides that 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. Consequently, the self-education expenses you incurred in undertaking your course have the necessary and relevant connection with the earning of your assessable income and are deductable under section 8-1 of the ITAA 1997.

Relevant facts and circumstances: You are employed in the financial services industry, focusing on wealth management and financial advice. You commenced study of an MBA at a university. Your employment role at the commencement of the MBA was at entry level, and you had the expectation that you would be promoted, which you achieved. You are now looking for more senior positions in the foreseeable future. The reason for completing the MBA is due to seeking additional study to maintain and enhance your existing skills and knowledge. The current course is maintaining and improving your specific skill and knowledge in your current position, as well as those in the near future. When completed, you anticipate the course will lead to an increase in your income and job promotion within your existing firm. You have maintained employment in Australia during this time and have undertaken the course on a part time basis. You plan to continue working with your existing firm for the foreseeable future with no intentions of changing industries. Within your firm there are Directors who have completed an MBA during their employment and one of them has mentored you through your studies. This has include quarterly catch ups to run through the subjects being studied, discussing your schedule of study plans moving forward and shining light on how the principles can be applied to your business/people. During your time at the entry level position, you held various degrees and just commenced your MBA. The expectation of promotion from this level to the next was conveyed through semi-annual performance reviews by your Managers/Directors in the firm. It was advised that you were on track for promotion at the end of the next six month period which will then lead to your promotion. This is a similar case for future expected promotions. Guidance and timelines are discussed with management to motivate and encourage employees and provide greater transparency for your career progressions. The selection process at your firm is a competitive selection process which includes ongoing performance reviews and career discussions with management. There were many individuals at the entry level prior to receiving a promotion. The promotion process itself is conducted through performance reviews, ongoing career discussions with your Directors and broader management in separate divisions within the firm. During these discussions and ongoing mentorship from management, discussions were led to detail the traits and characteristics you would need to grow or enhance to be in the form of leadership, business management and organising a team below you. You spoke about the firm offering support for study of an MBA because it targets the skills you require to grow in the organisation. It was agreed that this would be a great path to take and will set you up for success within this firm and contribute to your case for receiving promotions and standing out from the crowd. Your employer has indicated this program will lead to career and salary progression as you pick up skills along the course and complete it. Through ongoing mentoring by the firm during your studies, the provision of study days and flexible working conditions during assessments, and the discussions surrounding the skills you need to target for the future need to be technical, coupled along with managerial, the direction and content of the MBA is something that was agreed would help you progress and advance through the firm. In addition, you have already completed the highest tertiary education in your financial planning field and hence, management and you agreed that the skills you need to focus on for advancement and progression correlate with those in an MBA. Encouragement and motivation have been provided in the form of discussing in performance reviews your career progression steps and how undertaking this course will help you advance in your firm. Also, your employer provides days off when you have an exam. You are also provided with flexible working arrangements on occasions which require you to be away from the office during normal set hours (8 – 5). You have provided job descriptions of all levels from the entry level you were at when you commenced the study, through to those further promotions attained or expected.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1936 Section 82A Further issues for you to consider | Additional information | In certain circumstances you may have to reduce your allowable self-education expenses by $250. However you may have other types of expenses some of which are not allowable as a deduction that can be offset against the $250 before you reduce the amount you can claim for allowable expenses. | For more information on how to work out your self-education expenses, search for Quick Code (QC) 31970 at ato.gov.au .