Private ruling: Self-education expenses
Published: September 2015
Ruling period: The year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you entitled to a deduction for self-education expenses? | A1: No

Relevant facts and circumstances: You are employed as a head chef / assistant manager at a small motel. You commenced studying a Master of Business Administration. Your employer did not request that you undertake the course and does not provide financial support. Your employer is flexible allowing days off for exams and study. You employer provided a letter stating that you have embarked on your own self-funded self-improvement course.

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 and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business discusses circumstances in which self-education expenses are allowable as a deduction under section 8-1 of the ITAA 1997. If a taxpayer's current income-earning activities are based on the exercise of a skill or some specific knowledge and the self-education enables the taxpayer to maintain or improve that skill or knowledge, the self-education expenses are allowable as a deduction. 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 taxpayers 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 the Administrative Appeals Tribunal case Pujara v. Federal Commissioner of Taxation (2003) AATA 331 ( Pujara's case ), the taxpayer was enrolled in a Masters of Business Operations Management course at the University of Western Sydney. Mr Pujara came to Australia from India on a student visa in February 1998. He had obtained a Bachelor of Commerce degree. After graduation and before coming to Australia, he worked for a company that distributed fabrics to wholesalers. He was a warehouse assistant and worked in the despatch area. The purpose of the course was to provide advanced theoretical and practical skills in managing quality in a business organisation, including logistics management and statistical process control. The taxpayer was also employed part-time as an assembler store person for a pharmaceuticals company. His duties included the manual assembly of orders, updating records of bulk stock and assisting with stock distribution. In denying the taxpayer a deduction for his self-education expenses, the Tribunal determined at paragraph 19: the routine nature of the applicant's activities was such that the necessary skills and performance could be maintained without further training. Objectively, the new information and learning he acquired through the Masters degree was at a higher level than he required for his position. It would not improve or tend to improve his proficiency in a relatively junior role. The "perceived connection" between the Masters degree and the applicant's activities as an assembler store person is missing. The Tribunal is not satisfied, therefore, that the expenditure on self-education during the 1998-99 year of income was incidental and relevant to gaining or producing his assessable income. It is considered that your case is similar to Pujara's case in that the MBA you are undertaking is at a much higher level than would be required to carry out your current duties as a head chef / assistant manager. Although it is acknowledged that you may gain some knowledge and skills from the subjects studied that could be of some assistance in your current position, the predominant focus of the Master's degree is to provide the skills to open up a new income earning activity. Therefore, you are not entitled to a deduction for self-education expenses.