Private ruling: Work-related self-education expenses
Date of advice: 22 October 2024
Published: 2 December 2024
Ruling period: 30 June 20XX | 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for self-education expenses incurred in undertaking an Executive Master of Business Administration (EMBA)? | A1: Yes. Your self-education expenses are deductible as it is accepted that the study meets the requirements detailed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual.

Relevant facts and circumstances: On XX/XX/20XX you commenced your employment with your current employer. Your employer is in the financial industry. You are employed as a Financial Specialist. You commenced your current position on XX/XX/20XX. This is full-time employment. Your role as a Financial Specialist for your employer involves: • Analysing your employer's processes and make suggestions on how to improve them, using agile principles to drive continuous improvement initiatives and operational excellence. • A variety of skills such as process design, problem solving and effective communication in order to ensure performance and process development. • Planning, scheduling and implementing continuous improvement activities (i.e. completing user acceptance testing and facilitating change management). • Continuous improvement activities. • Credit assessment and approval. • Credit quality. • Customer focus. • Risk management. • Teamwork. On XX/XX/20XX you commenced studying for an Executive Master of Business Administration (EMBA) with a university. You intend to complete the course in the 20XX financial year. You are undertaking the course to improve your skills and knowledge in your current role. This is not a requirement from your employer. On XX/XX/20XX you received an email advising of a promotion opportunity for a more complex Financial Specialist that you are being considered for. The new role was initially intended to commence on XX/XX/20XX as part of your employer's restructure. As of the date of the private ruling application, you have not commenced the new role. You are not required by your employer to undertake the study as a condition of the promotion. The role as a complex Financial Specialist for your employer involves: • Analysing your employer's processes and make suggestions on how to improve them, using agile principles to drive continuous improvement initiatives and operational excellence. • A variety of skills such as process design, problem solving and effective communication in order to ensure performance and process development. • Planning, scheduling and implementing continuous improvement activities (i.e. completing user acceptance testing and facilitating change management). • Leadership. • Continuous improvement activities. • Credit assessment and approval. • Credit quality. • Customer focus. • Risk management. • Teamwork. • Strong knowledge and experience in understanding of financial services products. • Strong capabilities around leading a small team of individuals and leading change management efforts. • Consistently meeting continuous improvement targets. • Liaising with multiple stakeholders and identifying process improvement opportunities as well as implementing and delivering agreed business strategies. Your employer reimburses you up to $X per year for the student fees. You are not receiving Austudy, ABSTUDY or Youth Allowance to study. You are not receiving a taxable bonded scholarship. The following core subjects have been paid by you in the income year ended 20XX: • Adaptive leadership - develops students' ability to apply unique leadership approaches to different scenarios. • Business and political economy - develops students' analytical skills to examine the impact of macroeconomic forces on market conditions, interest rates, and inequality and to frame strategic insights on this basis. The following subjects have been reimbursed by your employer in the income year ended 20XX: • Strategies and business models. The following subjects have been paid by you in the income year ended 20XX: • Accounting practices and tools - financial accounting and management accounting grounding. • Applied financial management - tools and techniques in financial management. • Data driven decision making - business analytics, introduction to techniques and methods required for data-driven decision-making. • Sustainable value management - understanding ways in which environmental, social and governance (ESG) factors can be addressed using financial instruments, a sustainable financial system and investment decisions provides context for strategic planning and effective capital raising. • Innovation lab - understanding of a range of megatrends and how these can be addressed as opportunities for responsible management practice of business and social innovation. The following subjects have been reimbursed by your employer in the income year ended 20XX: • Transforming workforce capability. • Leading technological disruption.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual discusses the circumstances under which self-education expenses are allowable as a deduction. Self-education expenses are deductible where they have a relevant connection to the taxpayer's current income earning activities. 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 ( Finn v Federal Commissioner of Taxation (1961) 106 CLR 60; (1961) 12 ATD 348; (1961) 8 AITR 406). 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 ( Maddalena v FC of T (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). Taxation Ruling TR 2020/1 Income tax: employees: deductions for work expenses under section 8-1 of the Income Tax Assessment Act 1997 explains at paragraph 11 that employees are not entitled to deduct incurred expenses if they are reimbursed by their employer. | Detailed Reasoning - Application to your circumstances: You commenced your employment with your employer, who offer financial services, on XX/XX/20XX. You commenced your current role as a Financial Specialist on XX/XX/20XX. You commenced an Executive Master of Business Administration (EMBA) course on XX/XX/20XX to improve your skills and knowledge in your current employment role. In XX 20XX, you were advised that you are being considered for a promotion with your current employer. The job description for this new role contains complex tasks similar to your current role but also includes a leadership responsibility. You have incurred expenses relating to the EMBA course yourself and your employer has also reimbursed you up to $X a year towards course fees. | Detailed Reasoning - Conclusion: It is accepted that the above listed courses of the EMBA will help maintain or enhance the skills required in the performance of your current employment duties and will lead to or will likely lead to an increase in your income from your current income earning activities in the near future. Consequently, it is accepted that the study meets the requirements detailed in Taxation Ruling TR 2024/3 Income tax: deductibility of self-education expenses incurred by an individual . Therefore, the subjects which you incurred an expense for in the income years ending 20XX, 20XX and which were not reimbursed by your employer, are deductible under section 8-1 of the Income Tax Assessment Act 1997 .