The Institute of Public Accountants is pushing for the federal government to implement a new tax deduction to encourage Australians to retrain and reskill.  

The IPA, contents that a new deduction will fill a gap in the tax system that has neglected taxpayers who have been made to pay full cost of retraining and reskilling, despite the productivity boost it delivers to Australia’s economy.

It is in the viewpoint of IPA that taxpayers should be incentivised to widen their employment prospects, especially in the age of covid-19 where jobs have been displaced and the majority of the overseas immigration of skilled labour has been lost.

Australian taxpayers are currently eligible to claim a deduction for self-education expenses when the education activity is connected to the income arising from the individual’s current employment activities. However, the Treasury is currently deliberating about making changes that will enable claims to be made on training courses that would have the capacity to enhance an individual’s employment prospects from outside their current profession.  

The impact of the covid-19 pandemic has resulted in millions of Australians losing their jobs. For individuals who have been unable to find work after the pandemic, widening their skillset has the potential to play a vital role in getting them back into the workforce. There are almost 360,000 fewer jobs in Australia when compared to the number of jobs that existed 12 months ago. Currently over 900,000 Australians are still looking for work and over 1.5 million Australians are still on JobSeeker.

The IPA acknowledges that the new deduction would add more complexity to the administration of tax deductions, but “if that’s what it takes to encourage individuals to retrain and reskill, then is it not just as worthy as any other eligible tax deduction?”

Tony Greco from the IPA believes that those who protest that a new deduction on self-education expenses would favour high income earns is a falsehood. He believes that the proposed new deduction would be no different to any other deduction that is currently available for Australian taxpayers.

He also believes that the proposed deduction would be essential if the federal governments goes ahead with their plan to exempt employers from fringe benefits tax if they provide retraining and reskilling benefits to redundant, or soon-to-be-redundant, employees when the benefit may not relate to their current employment.

Similar to countries such as Germany and Japan, Australia is starting to face the issue of having an ageing workforce. Due to the current closure of Australia’s international borders as a consequence of the current pandemic, many industries across Australia have suffered from the huge loss of skilled migrant workers who are unable to travel to Australia to work. In order to fill the void left by migrant workers, it is crucial for Australians to be retrained and reskilled to make themselves employable in these industries that are in desperate need of skilled workers.

Claiming deductions for lifestyle or personal development courses that are not linked to income earning activities have been ruled out by The Treasury. The Treasury is also moving towards limiting deductions for nationally recognised training and industry training packages delivered by training and education providers that are registered with ASQA, TEQSA, VRQA and TAC. The Treasury has also proposed to limit the deductions for courses in areas that have expected job growth, as determined by the National Skills Council (NSC).

Despite being in favour the new deduction, the IPA believes that introducing such deduction would need to be met with appropriate integrity measures to prevent taxpayers who are looking to take advantage of the tax system

The IPA suggests that half of the upfront deduction is deferred until the taxpayer starts earning an income from a job associated with the industry they took the retraining.

This will mean that individuals won’t have to pay for the entirety of their education when the training doesn’t lead to employment in the industry of which they were hoping to find work in.