The Australian Taxation Office (ATO) has recently issued a draft ruling on self-education expenses which clarifies what can and cannot be claimed as deductions. If you pursue education related to your current job, you can typically claim the associated costs as a tax deduction, as long as your employer hasn’t already covered these expenses. Importantly, there is no specified limit on the amount you can claim as a deduction. However, before you start considering claiming these expenses, there are some important considerations to keep in mind which this article will guide you through.
Connection to Current Job
One of the essential criteria for claiming self-education expenses is that the education must be directly connected to your current job. If you are pursuing education to obtain a new job or for something unrelated to your current income-earning activities, the expenses are not deductible. For instance, if a nurse’s aide pursues a university degree to become a registered nurse, the expenses related to this degree are not deductible because it lacks sufficient connection to their current role as a nurse’s aide.
If your employment ends while you are in the middle of a course, your expenses can only be deducted up to the point at which you stopped working. Anything incurred beyond that point is not deductible unless you secure a new job where the course remains relevant.
Specificity of Knowledge and Skills
When it comes to personal development or self-development courses, ATO requires a direct link between your current role and the knowledge or skills acquired from the course content. A key challenge in claiming deductions lies in the fact that the knowledge or skills gained are often too general. For example, if a manager attends a stress management course to cope with work-related stress due to a family situation, this course may not be deductible because it is not designed to maintain or increase the specific skills or knowledge required in his/her current position.
Overseas Study Tours and Conferences
Expenses related to overseas study tours can be deductible if the primary purpose of the trip is connected to your income-earning activities, and it’s not purely recreational. Similarly, overseas conferences can be deductible if the primary purpose of the trip is work-related, even if there are some leisure activities involved. However, if you extend your stay beyond the conference for recreational purposes, you may need to apportion expenses accordingly.
Additionally, airfares incurred for self-education activities are deductible if you are not residing at the location of the self-education activity, as they are considered part of the cost of undertaking self-education.
Partial Deductions
Even if the entire course isn’t fully deductible, you may still claim a deduction for specific subjects or modules that are directly related to your employment or income-earning activities. In such cases, the course fees can be apportioned and this flexibility allows you to maximise your deductions.
By government support
When your course is designated as Commonwealth supported, you are not eligible to request a deduction for course fees. However, the deductibility of these course fees remains unaffected by the act of borrowing money to cover them. For instance, this applies to full-fee paying students who utilise a government FEE-HELP loan to meet their course fee obligations.
Scrutiny by the ATO
While there’s no specific limit on self-education expense claims, it’s important to note that the ATO may scrutinise large claims. To avoid any issues, be sure to maintain detailed records and demonstrate a clear connection between your self-education expenses and your current job or business activities.
In conclusion, understanding the rules and regulations of claiming self-education expenses on your tax return is essential for maximising your tax benefits. It’s important to ensure that your self-education is directly related to your current job, maintain meticulous records, and seek professional advice when necessary. By following these guidelines, you can maximise your eligible deductions while avoiding unwanted scrutiny from tax authorities.
Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or info@pittmartingroup.com.au.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
By Zoe Ma @ Pitt Martin Tax
Experienced Tax Accountant and Business Advisor with a demonstrated history of working in the accounting industry. Skilled in Tax, Accounting, Business Advisory and SMSF. Strong entrepreneurship professional with qualification Master of Professional Accounting, CPA Public Practice, Registered Tax Agent, Registered ASIC Agent, NSW Law Society External Examiner, Trust Account Auditor and Diploma of Finanical Planning. Specialised in SME, tax planning and international tax, he helped client save ample money and create wealth.
