Private ruling: Work Related Expenses - Self Education
Date of advice: 20 July 2015
Published: July 2015
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to a deduction for self-education expenses incurred for course fees, accommodation and travel associated with your Executive Master in Business Administration? | A1: Yes

Relevant facts and circumstances: You are in a medium level management position in a large organisation. During your probation period you found yourself in a position where you needed to improve your skills to perform your day-to-day tasks in several areas including strategic planning, change management, finance and tactical operations. You began an Executive Master in Business Administration course in another country. The program is prepared for people who live in different countries and remote locations. You performed home studies and attended in-person training approximately every three weeks for a period of X months. While studying overseas, you were staying in hotels and lodges. In total, X trips were required, and the classes varied from 3 to 6 days depending on the trip. Part of the program offered a dedicated study trip to another country for two weeks where you attended courses in two different business schools and you visited different private and public institutions in four different cities. You started the course to enhance your knowledge, allow you to grow in the organisation and improve your earning potential. Your employer is fully supportive of the training and allowed you to take days off for travel and study. The program required attendance once every three weeks instead of daily or weekly, it has a very good reputation and good value for money. Most of all a client was expanding into the particular area and you saw an opportunity to expand your knowledge of this market and progress your career.

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. Taxation Ruling TR 98/9 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 ( Federal Commissioner of Taxation v. Finn (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 ( FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161). In your case, it is accepted that the Executive Master in Business Administration course will enhance the skills and knowledge that are required in the performance of your current employment duties. Consequently, the self-education expenses incurred in undertaking this degree have the necessary and relevant connection with the earning of your assessable income. The cost of the course fees, accommodation and travel expenses for your course and the study trip are therefore deductible as self-education expenses under section 8-1 of the ITAA 1997.