Hey all,
I will be looking to pursue an MBA in the second half of 2022, which as you may know comes with astronomically high fees (>$60,000!).
I was wondering whether this is something that can be claimed against my current salary as a full-time engineer, as the fees will be required to be paid while I am still employed.
Thanks OzTaxForum!
can be claimed against my current salary
Sure, it can be claimed but it doesn't mean it would be a successful claim. Get ready to be audited. You need to demonstrate how it benefits you in your current line of work.
E.g., an IT support officer cannot claim the fees of a degree to become a programmer.
This. It must not be that the MBA is to give you a new role - even with the same company. To be tax deductible it must relate to your current income earning activity.
lots of engineers have mbas and progress to director/ceo levels.
lots of engineers have mbas and progress to director/ceo levels.
When I was a motor mechanic I couldn't claim the fees for doing a Mech Eng Associate Diploma. You can't claim for tomorrow's blue sky
You should have and I would have taken the ATO to court if they tried to deny the claim.
I don't think you can, usually only with short courses and job specific education.
Not true
As long as OP can show that the degree is to aid his current line of work, not to pursue a new line of work then it should be deductible
I think you are getting poor advice in this thread.
It would be trivial to demonstrate an MBA is related to engineering employment unless you have the most limited, junior role.
Since the deduction is potentially worth many thousands of dollars to you, I would suggest having a chat to your accountant to make sure you are claiming everything and keeping good records.
And if you do end up getting audited? So what? Tell them the reasons you believe the course is directly related to you progressing in your current role. Worst they can do is deny the claim, as you aren't doing anything wrong.
Thanks! Yes, I think I will have a chat with a tax accountant…
The route I will take is that my current career trajectory would lead to management within 5-10 years (or more), while pursuing a full-time MBA would accelerate that to a few years.
The key determination is that the course helps you in your current role; not a different role in a future position.
https://www.ato.gov.au/Individuals/Income-and-deductions/Ded…
As long as you can justify that and have records to show why you believe it helps in your current engineering role; you should be ok.
@mrhyde
Amongst the best advice here. Accurate and links to the Ato’s guidance
I’d also suggest op chats to their accountant
Another thing I realised. You said you want to do full time MBA. If you are doing full-time MBA, does that mean you will be leaving your current engineering role. In that case, how will the MBA be helping your current role when you don't even have a current role?
Thanks for the insights. It will help my current existing role, but note that I will have to quit it to pursue the MBA - but I will look to rejoin the profession, albeit in a mangement position or similar after the MBA.
Had a chat with my current manager, who was happy for me to be put on an indefinite leave without pay durign the course of the MBA, if that helps?
@mcbargainmeal: You should definitely check with your accountant/ ATO on that as the ATO may have some defined criteria as to what constitutes your current role.
For instance it may be that your role is defined as the primary source of your income or there may be an hours per week requirement
Disclaimer IANAL or an accountant
And if you do end up getting audited?
Just show the ATO this thread
I’m not sure why you’re implying something shady is going on.
Self education deductibility is to assist workers to improve their skills in their job. We don’t know what sort of engineer OP is, but it would have to be very junior role not to have involvement in resourcing, budgets, presenting, managing inputs and outputs to other parts of the business or client. These are all 100% things that you can study in an MBA.
I guess if OP is hoping to study equity markets or venture capital financing, they wouldn’t be related units, but plenty of stuff in an MBA course would be directly relevant.
Also an engineer. Studied a master's degree (of engineering, so not exactly the same, but the ATO doesn't know what course you are claiming for) part time while working full time. Claimed all the fees back ($25k per year). Got a couple of notifications and a letter from the ATO along the lines of "your deductions are really high for your occupation, are you sure they're correct?" but nothing further as it was indeed legitimate.
As per previous advice, provided your current role has some form of management involved, which I would guess is probably the case if you're a professional engineer, then you can meet the ATO's requirements for claiming the expense as self education and get a sizeable deduction out of it. I work with plenty of engineers who have MBAs so I would imagine it is not an unusual deduction.
@Polt: Thanks for sharing your experience.
Yes, am a CPEng engineer with Project Management as a field of practice.
The only difference in my scenario would be that I would not be working (or technically put on a sabbatical or indefinite leave without pay with my company) while I am pursuing the MBA. However, upon completion it is likely that I will rejoin the workforce.
And one other question: did you claim your fees in the financial year you undertook the study, or the financial year that you made the actual payment (assuming that you pre-pay for your course)?
@mcbargainmeal: There are a few case laws similar to your situation about employer support for your further education; I forgot the name of one case but it’s got to do with a mining engineer. Look it up.
If you’re away without pay/sabbatical year, you would not have income generated. You’d find a hard case to say that the expenses have a nexus with income where there is none. Your best option is to do both part time; job and study.
@mcbargainmeal: Yes pre-paid fees, and I claimed the fees in the financial year I incurred them, so when I actually paid them. Not a tax expert but I believe this is the way it has to be done.
You can't unless you need it for your current engineering job. Mrhyde has given the correct advice and link. Speak to the ato directly for any doubts you may have but everything is explained quite clearly on their website.
Noted, thanks for the advice. Will fall back on to ATO and a tax accountant when the time comes, but hearing others' experiences has been very insightful and interesting too.
are these circumstances similar to yours?
It’s hard to draw a nexus from engineering to managing unless you can mount a case that:
A) managing is inherit to your role
B) your employer supports it and states it will lead to more income
Unless you’re a business owner of course. Then all bets are on…
That is a very good find. It explains ATOs rationale of self-education expenses very clearly.
Gotta love a private ruling. Chances are someone has already written in
Pretty good example
This is a great example - thanks for sharing.
I am employed as a marketing specialist and I'm studying a degree in marketing. I claim this on my tax as a criteria of the job I applied for is having a marketing degree.
I've also studied a project management diploma and claimed that as a significant part of my role involves managing marketing projects.
You can ask the ato for a private ruling.
My wife did this a few years ago and they were surprisingly helpful. She was an occupational therapist and she studied to become an interior designer.
At the time she was planning a lot of house modifications such as making bathrooms accessible and adding in stair rails. One client needed a network of roof tracks designed and installed so they could move around the house in a sling!
She argued successfully that as an interior designer she could perform these type of modifications to a higher specification, work on large health construction projects like hospitals / nursing homes and, importantly, make more money in the same "role" and so pay more tax. They agreed that fit the description for self education expenses. From this I see that they are fairly liberal in how thet assess these things. You need to make a case that is to expand your current role. You need to word your application carefully.
Unfortunately, she then had our kids, left the OT job and studied part time for 5 years. You can't claim a tax deduction if you're not paying any tax!
Now she has a $30 HECS debt and gets paid half what she did as an OT but enjoys it much more!!
MBA = Master Bullshit Artist
So clever
Do you do ANY management in your engineering work? If yes then you can claim your MBA studies.
Sauce ;-p. I am an engineer who did an MBA many many years ago and claimed it on tax.
Business management is an excellent accompaniment to engineering as it gives you an understanding of the non-technical aspects of working in an engineering company. Even during the studies it helped me get a job as a business analyst in the same business.
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