Heaney Business Group provides insights into the latest developments from the Australian Taxation Office concerning self-education expenses. Explore the nuances of deductibility in self-education expenses and what falls within the realm of claimable and non-claimable.
Engaging in studies connected to your profession typically allows you to claim associated costs as a tax deduction, assuming your employer hasn’t covered them. The deductible value has no set limit, presenting a favorable scenario. However, caution is necessary before claiming expenses for prestigious degrees, accommodations, and flights, such as a Harvard graduate program.
Clients often find surprises in what cannot be claimed. Self-education expenses are not deductible if pursued for a new job or something unrelated to your current income source. For instance, a nurse’s aide attending university to become a registered nurse cannot claim the expenses, as the nursing degree lacks sufficient connection to their current role.
Although the recent ATO draft ruling doesn’t introduce new rules, it reinforces what the ATO will accept and reject.
Personal Development Courses
Claiming deductions for self-development or personal development courses can be challenging, as the knowledge or skills gained may often be too general. For example, a manager attending a stress management course to cope with family-related stress may find the course non-deductible if it doesn’t enhance skills or knowledge relevant to their current position.
When Employment Ends Mid-Course
If your employment or income-earning activity ends mid-course, deductions are limited to the point of stopping work. Expenses incurred beyond that point are not deductible until you secure a new role, provided the course remains relevant.
Overseas Trips with Work Elements
Overseas study tours are deductible in limited circumstances, requiring proof that the trip’s dominant purpose is related to how you earn your income. Factors demonstrating this include time devoted to work-related knowledge advancement and employer support. The ATO is stringent on these criteria.
Overseas Conferences with Recreation
Conferences with leisure elements can be fully deductible if the dominant purpose is work-related. If leisure time is incidental to the conference, full conference expenses can be claimed. However, if the stay extends beyond conference dates, expenses must be apportioned based on the proportion related to the conference.
If a course isn’t entirely deductible, deductions may still apply to specific subjects or modules sufficiently related to your employment or income-earning activities. For instance, a civil engineer completing an MBA might find deductions applicable to project management subjects.
Government Assistance Interaction
If your course is a Commonwealth-supported place, course fees cannot be claimed. However, borrowing money for fees, such as using a FEE-HELP loan, does not impact the deductibility of course fees.
Warning on Large Claims
While there’s no fixed limit on self-education expense claims, the ATO may scrutinise large claims more closely. Establishing a clear connection between current job or business activities and self-education expenses is crucial before making a claim.
Notably, airfares incurred for self-education activities, provided you’re not residing at the activity’s location, are deductible as part of the overall cost of undertaking the self-education activities.