Private ruling: Work related expenses self-education
Date of advice: 9 October 2017
Published: March 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Can you claim a deduction for university fees paid in connection with a self-education course (Masters of Business Administration)? | A1: Yes

Relevant facts and circumstances: You are employed as a solicitor. You have enrolled in an MBA course. The course will further develop your skills and knowledge of your current employment. In addition, the subjects you will undertake in the course will expand your knowledge in areas relevant to your employment position. Your employer has recommended that you undertake this course and is encouraging you to complete the MBA. Your employer has provided you with unpaid leave for the duration of the course. You paid course fees in the 2016/2017 financial year.

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. In addition, 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, the self-education expenses are allowable as a deduction. However, the decision of the High Court in FC of T v. Maddalena 71 ATC 4161; (1971) 2 ATR 541 establishes the principle that no deduction is allowable for self-education expenses if the study is to enable the taxpayer to get employment, obtain new employment or to open up a new income-earning activity (whether in business or the taxpayer’s current employment). This includes studies relating to a particular profession, occupation or field of employment in which the taxpayer is not yet engaged. The expenses are incurred at a point too soon to be regarded as incurred in gaining or producing assessable income. If a course of study is too general in terms of the taxpayer’s current income-earning activities, the necessary connection between the self-education expenses and the income-earning activity does not exist. In your case you are undertaking study in business administration. The Commissioner is satisfied that there is a sufficient connection between the skills and knowledge required in your current position as a lawyer and the masters of business administration course that you propose to study. Accordingly you are entitled to a deduction for the costs associated with the masters of business administration course.