Will all self-education expenses relating to the course you have undertaken be an allowable deduction under section 8-1 of the Income Tax Assessment Act 1997 ('ITAA 1997')?
No. This private ruling applies for the following period: Year ending X June 20XX. The scheme commenced on: X July 20XX.
You are a fulltime employee for a company. You work remotely from your home office. You are also required to visit customer sites in other parts of Australia, and another country. Your employment comprises of two main responsibilities being a 'field service engineer' and a 'salesperson'. In addition to this, you act as 'backup service manager' when required. 90% of your responsibilities pertain to the role of 'field service engineer'. The remaining 10% of your responsibilities pertain to the roles of 'salesperson' and 'backup service manager'. The responsibilities of the field service engineer work include: • Proactively manage/review any preinstallation (including site review/visit) requirements with sales staff and customers to ensure the customer site is ready for the installation. • Perform installations, training and repair work in your primary geographical region as well as to other parts of Australia and another country when required. • Proactively review and progress service cases where you are the assigned primary FSE working with sales, suppliers and customers on issues until they are completed.
• Ensure case updates are made to the case notes in SF and review next actions to ensure cases progresses in a timely manner. • Review service cases prior to visiting customer site to ensure you have the correct test equipment, parts (including consumables, power cables etc) and identify potential repair pathways to limit the number of site visits required to resolve a case. • Prepare the service report at the conclusion of each service case in SF and email a copy to the customer in a timely manner. • Provide telephone and email technical support to customers as well as to our staff including contacting suppliers for advice. • Escalate any problem issues to the Service Manager for additional help/support. • Provide help with any service case, not only those where you are the primary. • Make suggestions for tools & equipment purchases and upgrades. The responsibilities of the salesperson include: • Respond promptly to all customer enquiries for your designated products and territory the sale. • Vigorously and pro-actively progress all current enquiries throughout the sales cycle.
• Develop and implement strategies to advance and win the sale • Anticipate, prepare for and respond to competitive threats • Prepare proposals, tender responses and quotations that persuasively present the benefits of in accordance within the general guidelines and approval process set by Directors • Visit customers as required • Actively seek new sales opportunities for the assigned products. Activities include, but are not limited to: a. Reviewing funding announcements and intersecting potentially funded customers b. Planning for and attending relevant conferences to display equipment and generate sales enquiries d. Coordinating Principal visits d. Arranging workshops for select instrumentation • Manage sales opportunities via 'SalesForce'. • Work with Marketing Coordinator to plan and execute special marketing projects as required. • Proactively identify, asses and work with Sales Manager on the recruitment of potential new Principals. • Provide training to other staff. • Proactively assist customers with post sales problems.
• Liaise with service and accounts as required to resolve post sales issues. In month 20XX, you commenced a part-time Master of Business Administration ('MBA') course at a University. The course is expected to take 3.5 years to complete. You attend classes outside of work hours. You are undertaking the following units as part of the MBA. • Leadership • Business Essentials • Managerial Ethics and the Business Environment • Managing People • Data Analysis • Managerial Economics • Marketing • Financial Accounting • Financial Management • Operations • Business Strategy • Current Business Issues • Elective 1 - Brand Management • Elective 2 - Business Analytics • Elective 3 - Innovation • Elective 4 - Managerial Judgement • Elective 5 - Managing Diversity in the Workplace • Elective 6 - Negotiations. Your employer encourages you to undertake the course by paying you study leave in the form of 50% personal leave and 50% recreation leave.
Your employer has advised that you will maintain your current role throughout the duration of the course. Your employer advises that the MBA is critical for enhancing managerial capabilities in preparation for higher duties within the company. Your employer considers you to be a future leader at the company.
Income Tax Assessment Act 1997 section 8-1
Summary Your self-education expenses are not deductible as it is not accepted that the study meets the requirements as set out in Taxation Ruling 2024/3 Income Tax: deductibility of self-education expenses incurred by an individual, and the Commissioner is not satisfied that your study has the relevant nexus to your income earning activities. Detailed reasoning 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. Self-education expenses are deductible under section 8-1 of the ITAA 1997 where they have a relevant connection to the taxpayer's current income earning activities. Taxation Ruling 2024/3 Income tax: deductibility of self-education expenses incurred by an individual
(TR 2024/3) discusses circumstances in which self-education expenses are allowable. 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/s of the self-education enables the taxpayer to maintain or improve that skill or knowledge (paragraph 22 of TR 2024/3). 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 their current income earning activities in the future', a deduction is allowable. However, as stated in paragraph 23 of TR 2024/3, no deduction is allowable for self-education expenses if the study will enable you to get employment, to obtain new employment or to open up a new income-earning activity (whether in business or in your current employment). This includes studies relating to a particular profession, occupation or field of employment in which you are not yet engaged. These expenses are incurred at a point too soon to be regarded as incurred in gaining or producing your assessable income. This is further outlined in the decision of the High Court in
FC of T v. Maddalena (1971) 45 ALJR 426; (1971) 2 ATR 541; 71 ATC 4161( Maddalena ). To be able to claim a deduction, the expenses must relate to your income earning activities at the time of incurring the expense (paragraph 72 of TR 2024/3). In determining whether a deduction is allowable for self-education expenses there would need to be an examination of how the courses are connected to your income earning activities at the time the expenses were incurred. Application to your circumstances Generally, taxpayer's can claim a deduction for study and self-education expenses if the course directly relates to their current work activities and results in or is likely to result in an increase in income from their current work activities. An MBA can be described as a course that focuses on the principles of business administration. We consider there to be an insufficient nexus between the units of study being undertaken and your income-earning activities to make them deductible under 8-1 of the ITAA 1997.
Although there is a vague nexus between your role as a salesperson and the MBA course, we consider this nexus to be insufficient to make the units of study deductible under 8-1 of the ITAA 1997. We do not consider there to be a nexus between your role as a field service engineer at the MBA course to make the units of study deductible under 8-1 of the ITAA 1997. You have been described by your employer as a future leader for the company and this course may open up new income-earning activities within your current employment. For the purposes of section 8-1 of the ITAA 1997, we consider these expenses to be incurred at a point too soon to be regarded as gaining or producing assessable income.