Education expenses

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Note: In response to a decision of the High Court, with retrospective effect from July 1, 2011, the government will amend the tax law to prevent self education deductions from being claimed against all government assistance payments. For the 2010-11 income year, eligible taxpayers who receive Youth Allowance payments are still able to claim a deduction for self education expenses provided that they have maintained records of their expenditure.

To get ahead of the game, and bolster your worth as an employee, you need to flex your grey matter as often as possible. Self-education is one way of ensuring you keep up to speed with developments and methods relating to your field of employment, with the added bonus of making you look fantastic to any future employers.

To help encourage employers and employees alike to undertake educational programs, there are a number of self-education tax deductions available, which include courses undertaken at educational institutions (whether leading to a formal qualification or not), attendance at work-related seminars or conferences, self-paced learning and study tours (overseas or within Australia).

The expenses for self-education can be deducted provided there is a direct and provable link between the course undertaken, and how you derive your income.

Generally you will need to satisfy any of the following tests to be entitled to a tax deduction:

• the expense has a relevant connection to your current income earning activities (ie. the course must be relevant or incidental to how you derive your assessable income)
• the self-education program being undertaken enables you to maintain or improve the skills or knowledge necessary to carry out your income earning activities
• the self-education leads to, or is likely to lead to, an increase in your income from your current income earning activities in the future.

Deductions for self-education expenses are not allowed if the course of study is designed to:

• get employment in a new field of endeavour (eg. a teacher studying law to become a lawyer)
• get employment or obtain a qualification to enable you to enter a restricted field of endeavour (eg. obtaining a degree to be able to practice as a surveyor), or
• open up new income earning opportunities in the future (whether in business or in your current employment) because they are incurred at a point too soon to be regarded as being incurred in gaining or producing your assessable income.

Expenses that are tax-deductible:

• course or tuition fees (including student union fees)
• textbooks, professional or trade journals, technical instruments and clerical expenses such as word-processing or photocopying
• depreciation on professional libraries, desks, computers and filing cabinets, etc.
• fares, accommodation and meals incurred on study tours, work-related seminars or conferences away from the taxpayer's home
• interest on money borrowed to pay the above expenses or purchase plant or equipment on which depreciation is allowable, and
• travel costs (including motor vehicle and fares etc).

Expenses that are not tax-deductible:

• any HELP (previously HECS) payment (unless paid or reimbursed by the employer: HELP payments are generally not tax deductible, however if they are paid or reimbursed by an employer they are tax deductible to the employer but FBT is payable by the employer)
• meals purchased while on normal travel between home and an educational institution, and
• travel expenses between home and an educational institution at which the taxpayer works.

In some cases, courses will have both deductible and non-deductible elements (eg. a plumber who runs his own business who undertakes a business management course where completion of the course will enable the plumber to also operate as a qualified business administrator).

In that situation, the deductibility of the expenses will be determined by your intention when the course was undertaken. If you can show that the course is incidental and relevant to your existing income earning activities, the cost is deductible. Creation of other opportunities is irrelevant, as long as it was not the purpose for which you undertook the course. Alternatively, if the course was undertaken with the specific intention of changing the taxpayer's income earning activity, the deduction would not be allowed.

Where the expenses would otherwise be deductible under the legislation, a deductibility limit applies for the purposes of the tax law (section 82A ITAA36, if you want to look it up). Here it says that only amounts greater than $250 can be claimed. Relevant costs are in connection with a course of education provided by a school, college, university and so on.

Last reviewed 27/07/2012