Australian workers are currently able to claim tax deductions on self-education expenses when the education activities are directly connected to the income arising from their current employment activities. To be tax deductable the self-education must also maintain or improve the specific skills or knowledge that is required in your current work activities. Furthermore, the self-education should or is likely to result in, an increase to your income from your current work activities.
An individual is also able to claim a deduction for self-education expenses if, by undertaking a certain course you are satisfying study requirements to maintain your right to a taxable bonded scholarship. If you are employed by the scholarship provider, normal work-related self-education rules will apply.
Expenses Taxpayers Can Claim
There are a number of claims you can make for a tax deduction. These include; accommodation and meals if you are away from home overnight, computer consumables such as ink or printer cartridges. You can apply to obtain a deduction for internet fees (excluding connection fees), phone calls, postage, stationary, textbooks, fares, interest, running costs for your home office, student union fees, student services and amenities fees, student services and amenities fees.
Another key tax deduction an employee can claim relates to car expenses. This includes travelling between home and your place of education or travelling between your workplace and the place of education. These tax deductions can be claimed if your self-education has a sufficient connection to your current role of employment.
$250 reduction in expenses
Self-education expenses are broken into five categories. Categories A to E. If a self-education item is included in “category A” than an employee has to reduce their deduction by $250. Deductions they have to be reduced include; tuition fees, stationery, textbooks, student union fees, student services and amenities fees, car expenses worked out using the ‘logbook’ method (other than the decline in value of a car), public transport fares, running expenses for a room set aside specifically for study.
However, ‘category E’ expenses’ can be used to offset the $250. While you can’t claim a deduction for the following expenses, you can use them to offset the $250 reduction. These expenses include: capital expenses related to your self-education such as, the purchase of a desk, childcare while attending self-education activities and fares, travel or car expenses for these journeys.
For work-related self-education, the second leg of a trip if you went from home to your place of education and then to work, or the other way around.
If you receive a taxable bonded scholarship and are not employed by the scholarship provider, travel from home to your normal place of education and back.
The future of self-education deductions
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.
Due to the current closure of Australia’s international borders as a consequence of the current covid-19 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.
The Treasury has stated that “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. 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.
Things taxpayers can’t claim as deductions related to their self-education
Australian taxpayers are unable to claim deductions on tuition fees paid by someone else or that you have been reimbursed for student contribution amounts. They are also unable to claim repayments of Higher Education Loan Program (HELP) loans (although the fees paid by some HELP loans are), Student Financial Supplement Scheme (SFSS) repayments, Student Start-up Loan (SSL) repayments, VET Student Loan (VSL) repayments, home office occupancy expenses – for example, rent, mortgage interest or rates, Trade Support Loan Program (TSL) repayments or accommodation and meals (unless sleeping away from home for study, such as to attend a residential school).