Private ruling: Deductibility of self-education expenses
Date of advice: 22 March 2016
Published: May 2016
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to claim a deduction for your self-education expenses including course fees paid to an overseas education institution to complete your Master of Business Administration (MBA)? | A1: Yes

Relevant facts and circumstances: You are employed full time as a Project Manager for a company Your role includes: • Management of project teams • Management of external consultants, architects, engineers and contractors • Management of project finance, budget, programme and quality • Project risk control and management of financial exposure • Understanding property and project valuations • Analyse cost/benefit of the use of processes You have enrolled as a part time student in a Master Business Administration (MBA). The course will further develop your skills in the areas of project managing work, business ethics, inspiring commitment and trust, strategic thinking and presentation skills. You are primarily studying the MBA through an Australian university but intend to complete some elective units overseas. The overseas study is part of the endorsed study programme with the Australian university's Partner Institution. You require these skills in your present position and will further enhance your skills and competency allowing you to improve your current skills and lead to an increase in future income in your present position. Your employer has provided a written letter stating that they are supportive of your further education through flexible working hours and providing you with study leave when required. You are not receiving any reimbursement or allowance from your employer towards your course of study. You will use FEE-HELP to assist you in paying the course fees and are funding your own education expenses. You will incur the following expenses: • Tuition fees • Airfares to attend overseas Partner Institution • Accommodation and meals (as part of your overseas travel expense) • Books, journals and stationery You intend to study overseas for a period in the relevant years at the overseas university. You will be remaining overseas while undertaking the course subjects. You will maintain your existing lease on your residence in Australia while you are overseas and will return to this property. You are not being accompanied by any family members whilst travelling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1 | Income Tax Assessment Act 1997 Section 26-20 | Income Tax Assessment Act 1997 Section 900-115 | Income Tax Assessment Act 1997 Section 900-120

Reasons for decision: Detailed Reasoning - Work-related self-education expenses: Section 8-1 of the Income Tax Assessment Act 1997 ( 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 to the extent to which they are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 98/9 discusses the deductibility of self-education expenses. 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. Thus, self-education expenses incurred by a taxpayer will qualify for deduction under section 8-1 of the ITAA 1997 , if there is a sufficient nexus to the production of assessable income and the improvement of a skill or some specific 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. Paragraph 23 of TR 98/9 states that subject to the general tests under section 8-1 of the ITAA 1997 being met, the following types of expenses relating to approved self-education are allowable deductions; • course or tuition fees of attending educational institutions, conferences or seminars • the cost of professional and trade journals, text books and stationery • airfares incurred on overseas study tours, on work-related conferences or seminars, or attending educational institutions • where a taxpayer is away from home overnight or temporarily, accommodation and meal expenses incurred on overseas study tours, conferences or seminars, or attending an educational institution In your case, it is accepted that the Masters of Business Administration course will maintain or enhance the skills that are required in the performance of your current role. Consequently, the self-education expenses incurred 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 ITAA 1997 for self-education expenses. Course fees/FEE-HELP You have demonstrated that the course of education has a nexus to your current employment. Therefore, as outlined in TR 98/9 you are allowed a deduction for your course fees incurred in attending an educational institution under section 8-1 of the ITAA 1997 . The tuition fee can be claimed in the financial year in which the expense is incurred. FEE-HELP and VET FEE-HELP was introduced by the Commonwealth to provide assistance to students who are not supported by the Commonwealth to pay course fees. When you pay your course fees by VET FEE-HELP, you are entitled to deduct the expenses when they are originally incurred (subject to the below deductibility tests). However you are not entitled to a deduction for the repayment of the VET FEE-HELP debt itself (Section 26-20 of the ITAA 1997 ). As you have met the requirements for eligibility for a deduction for self education expenses, the whole course fee is deductible when it is incurred. However, as stated above, you are not entitled to claim a deduction for repayments of the VET FEE-HELP debt. Airfares You will incur the expense of airfares in travelling to Overseas University to attend an educational institution related to your income earning activities; you will therefore be entitled to a deduction for these costs under s 8-1 of the ITAA1997. Documentation satisfying the requirements of section 900-15 or 900-120 of the ITAA 1997 is required to substantiate the expenses included in these claims. Accommodation and meals Whilst at overseas University, you will incur accommodation, food and personal expenses. Expenditure on accommodation and food ordinarily has the character of a private or domestic expense. However, the occasion of the outgoing may operate to give the expenditure the essential character of an income-producing expense. Paragraph 89 of TR 98/9 outlines: Where a taxpayer is away from home overnight in connection with a self-education activity, accommodation and meals expenses incurred are deductible under section 8-1. (Examples include an overseas study tour or sabbatical, a work-related conference or seminar or attending an educational institution.) They are part of the necessary cost of participating in the tour or attending the conference, the seminar or the educational institution. We do not consider such expenditure to be of a private nature because its occasion is the taxpayer's travel away from home on income-producing activities. However, where it is considered that a taxpayer has established a new place of residence, the accommodation expenses will retain its private nature and will not be deductible. TR 98/9 states: The key factors to be taken into account in determining whether a new home has been established include: • the total duration of the travel; • whether the taxpayer stays in one place or moves frequently from place to place; • the nature of the accommodation, e.g., hotel, motel, long term accommodation; • whether the taxpayer is accompanied by his or her family; • whether the taxpayer is maintaining a home at the previous location while away. • The fact that the taxpayer did not maintain a home while away for an extended period was the decisive factor in characterising expenditure on accommodation and meals as private 'living expenses' in a series of Board of Review decisions: Case N13 13 TBRD (NS) 45; 10 CTBR (NS) Case 98; Case N16 13 TBRD (NS) 65; 10 CTBR (NS) Case 99; Case N19 13 TBRD (NS) 76; Case N20 13 TBRD (NS) 79; and • the frequency and duration of return trips to the previous location. In your case you will be studying at overseas University in both relevant years. You will be returning home after the study and will be maintaining a residence in Australia whilst you are away. Therefore you are entitled to claim a deduction relating to accommodation, meals and personal expenses. In these circumstances, expenditure is allowable under section 8-1 of the ITAA 1997 .