Michael Bailey Deputy editor

Michael has been a business journalist for 12 years. He has extensive experience editing magazines covering funds management, commercial property and the travel industry. In 2011 he won a Citi Excellence in Financial Journalism award for a BRW cover story on economic indicators.

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Your MBA is safe for now: government defers self-education cap

Published 02 August 2013 15:09, Updated 05 August 2013 07:01

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Your MBA is safe for now: government defers self-education cap

The self-education cap is not scrapped yet, but its start date is scarpered thanks to ministers Kim Carr and Chris Bowen. Photo: Dominic Lorrimer

The MBA industry is breathing easier after the Labor government’s economic statement deferred the proposed start of the $2000 self-education cap for one year.

Master of business administration programs costing as much as $50,000 a year would have been severely impacted by the cap on tax-deductible self-education, which Labor proposed to help get its budget back to surplus by 2016 in the face of a $33 billion revenue shortfall.

“The 12 month deferral represents a temporary but significant reprieve for the hundreds of thousands of people who choose or are required to invest in their own education and professional development,” says Belinda Robinson, chief executive of peak body Universities Australia.

The UA led the “Scrap the Cap Alliance” of more than 70 industry and professional groups formed to lobby against the cap, which has been more successful at this stage than pressure groups formed by the car and salary-packaging industries to overthrow the proposed end of the “statutory method” for calculating vehicle business usage for fringe benefits tax purposes.

In announcing the self-education tax cap earlier this year – delivering a saving of approximately $520 million – former Treasurer Wayne Swan justified it on the basis of cracking down on system abuse.

“If implemented, the measure would have increased the effective cost of post-graduate fee-paying courses by an estimated 30-to-54 per cent, resulting in a decline in post-graduate and professional development programs by an estimated one third,” Robinson says.

“It would reduce national productivity by up to $6 billion per annum and reduce tax revenue by up to $1.5 billion per year.”

The government’s economic statement notes the deferral will “allow for further consultation on how best to target excessive claims while ensuring the impact on university enrolments and genuine continuing professional development is minimised.”

Robinson thanked Higher Education Minister Kim Carr and Treasurer Chris Bowen for sidelining the policy of the former treasurer.

“We also call on the opposition to declare its hand on whether it intends to abolish the measure,” Robinson says.

The government should target specific situations where the system is being exploited, rather than introduce “an ill-conceived policy that runs at odds with the Government’s ‘education revolution’ and normal sensible education spending,” says Lance Cunningham, national director of tax at audit firm BDO.

“We are concerned the cap will negatively impact, or severely limit, Australians seeking to improve their skills at a time where maximising workforce productivity is paramount.”

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