The Federal Government has announced a proposal to limit the tax deduction for work related self-education expenses, potentially increasing the cost of undertaking an MBA.
Under the proposed changes announced by Treasurer Wayne Swan work related self-education expenses will be capped at $2,000 per person from 1 July 2014. Under current arrangements these deductions are unlimited.
The changes will specifically hit part-time MBA and Executive MBA students as the deduction can only be claimed if the study is related directly to your employment. Students who undertake cost-intensive travel, including international study tours, will be the hardest hit.
Mr Swan said the current system allowed students to “enjoy significant private benefits at taxpayers’ expense”.
“Without a cap on the amount that can be claimed under this deduction, it’s possible to make large claims for expenses such as first class airfares, five star accommodation and expensive courses,” he said.
QUT Business School Executive Director Bob O’Connor said the proposal was the equivalent of using a ‘”sledgehammer to crack a nut”.
“This will impact not just postgraduate management students but postgraduate students across the board,” he said. “It could have a significant impact on the standard of future leaders across a variety of fields.”
“I think they would be much better off taking a targeted approach to the excesses within the system, rather than just imposing a blanket ceiling across the entire system.”
Eligible education expenses under the current system can include formal qualifications and associated tuition fees, textbooks, stationery and travel expenses and also conferences, seminars and self-organised study tours.
The reform will save the government around $520 million and help fund a $14.5 billion dollar overhaul of the way Australian schools are funded. Direct funding to universities will also be cut under the proposal.
The Government has said the proposal was “targeted reform” and the majority of those with self-education expenses will not be affected by the change. According to the most recent ATO data, the typical claim for formal qualifications is less than half the proposed cap at $905. For other expenses, such as conferences, seminars and workshops, including those held locally, the typical claim is only a few hundred dollars, remaining well below the cap.