Australian taxpayers might soon be able to claim deductions for training and education programs unrelated to their chosen area of profession. Changes surrounding FBT exemptions for retraining and reskilling included in the recent federal budget have been implemented to encourage Australian workers to upgrade their skillset to make themselves more desirable to employers for a larger variety of different jobs. 

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.

Due to the ever-evolving labour markets, millions of Australians are expected to work in multiple industries over the duration of their lifetime. Due to the emergences of new technologies, by the end of the current decade many Australians will most likely find themselves working in jobs that are yet to be created. This is evident as jobs such as a social media marketing practitioner didn’t exist in a world before Facebook.

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).

“It is important to understand the changing labour market needs, the skills requirements of current and future jobs, the structural shifts that will occur and the skilling and retraining needed to get people to gain and sustain employment,” the Treasury said. 

“A new deduction could target assistance to areas of current labour demand or forecast job growth.” The Treasury also contends that full proof will be required to make sure any new deductions are not being abused. This will be done by a process of keeping detailed records and receipts. This will also include keeping the details of the course and it’s training provider. This is so that the deduction can be effectively administrated, protect against revenue loss and assist mitigate compliance concerns.

If changes are made to the current deduction system, The Treasury wants to introduce additional integrity measures so that the risk of the deductions being misused is less likely to occur. Tax concessions cost money and therefore if the initiative is introduced, it would be appropriate for the worker who is undertaking the training to share that financial risk.

It is most likely that if the changes were introduced that half of the upfront deduction would be quarantined until the worker is earning money from any activity associated with the retraining they have chosen to undertake. The Treasury believes that it is crucial to ensure that the taxpayers aren’t wearing the entire cost of the education fees especially in instances where the retraining doesn’t result in the employment of the individual who has undertaken the training.

The Government is also planning to remove the 47% FBT on retraining provided by employers to employees who have been made redundant or are facing redundancy. This proposal will assist with helping employers obtain a new role in the company that they are currently working for or have previously been employed by.