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To stay ahead of the game today, you need to broaden your mind and self-education is a great way to do just that. Keeping up with trends, learning new techniques and increasing your wisdom in your field or industry is the perfect recipe for success. To encourage employees and employers to undertake educational opportunities, the government offers a number of self-education tax breaks.
Self-education expenses can be deducted as long as there is a direct connection in the education and the way you obtain your assessable income.
Deductible self-education includes:
- Courses taken at an educational institution (formal qualification or not)
- Attendance at a workshop or seminar
- Work related conferences
- Self-paced or distance learning
- Study tours (overseas or domestic)
Some education expenses are subject to a deductibility limit as well. Under the general tax laws only amounts greater than $250 can be claimed as an expense (the first $250 is not deductible).
General conditions for deductibility and non-deductibility
In general if your self-education meets any of the following requirements you may be entitled to a tax deduction:
- the expense has a direct relationship to the current earning activities, the course is relevant to how the tax payer earns assessable income.
- the self-education course improves skills or knowledge necessary to carry out the income earning activity.
- the self-education is likely to lead to future increases in the income from the income earning activity.
Deductions for the self-education course is not deductible if the course is designed to:
- enable employment in a new field or industry (for example a teacher studying to be an accountant)
- enable employment or achieve a qualification in a specific or restricted field, such as a surveyor.
- allow for a new income earning opportunity in the future (in business or current employment) because they are undertaken at a point too soon as being connected to the assessable income of the tax payer).
It’s also possible for part of the self-education to be deductible while other elements are non-deductible. For example if an electrician who runs his own business takes a business management course to also practice as a qualified business administrator. In this case, the deductibility will depend on the intention of the tax payer when the course was taken.
If the self-education is relevant to the existing income activities, the costs will generally be deductible. If the education happens to create other opportunities in the future is irrelevant. If the course was taken specifically to change occupations, then the self-education would generally not be deductible.
Expenses that are tax deductible
In general the following expenses are allowable:
- course and tuition fees, including student union fees.
- textbooks, professional journals, technical instruments and stationery or clerical materials.
- depreciation on office equipment, professional libraries, filing cabinets, computers, etc.
- accommodation and meals during study tours, work related seminars or conferences away from the tax payer’s home.
- interest on money borrowed to pay for any of the above expenses or to purchase equipment on which depreciation is allowable.
- travel costs including motor vehicle and fares.
Expenses that are not tax deductible
- education expenses against income received through assistance programmes, such as Youth Allowance.
- meals purchased during regular travel between home and the educational institution.
- travel expenses between home and educational facility where the tax payer works.
- contributions made under the Higher Education Support Act 2003and Student Assistant Act 1973, such as HELP payment. (Unless the Help payment is paid or reimbursed by an employer they would be deductible by the employer but FBT is payable.)
Travel costs between the tax payer’s home and workplace is not an allowable deduction. Travel costs are generally only deductible between:
- the tax payer’s home and educational institution including a library for research, and
- the tax payer’s workplace and school.
The travel expenses between the home and school are not allowable if the taxpayer carries out an income producing activity at the school. Such costs becomes travel expenses between work and home (not school) and may not be allowable depending on the circumstances.
Work-related education programmes
In general, the costs of educational programmes such as seminars or professional development courses are deductible if the connection between the assessable income and the course can be established. However, some studies commencing prior to employment (at a point too soon) are generally not deductible.
If you have self-education costs and require further information please contact Travis Allen at our Caulfield office.
Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.