There are certain types of tax deductions that can be more daunting than others to wrap your head around at tax time. One of these is ‘self-education’ expenses, which encompasses all training, development, and conference expenses, including the auxiliary expenses like travel, supplies, and even depreciation. This article will unpack some of the important information and shining a light on some common misconceptions surround self-education expenses.
Firstly, let’s look at when self-education expenses are and are not deductable. The key for an expense to be deductable is the ‘nexus’ or relationship to your income earning activities, typically your employment. Deductible self-education will include any expense relating to courses, conferences, seminars or self-paced learning that is undertaken for either of the following reasons:
- To maintain or improve a skill or specific knowledge required for your then current work activities
- The education is leading to, or is likely to lead to, increased income from your then current work activities.
Failure to directly meet one of these likely means your expenses in not deductible against your income.
Misconception #1 – “I am taking on some extra education in my own time so I can switch industries/departments at work. It’s a little expensive but at least I can claim it”
This is false. The education must have a direct relationship with your employment at the time your first engage in the undertaking. If you switch or gain employment in a new field part way through education or training, the new employment cannot (in most cases) be considered for existing educational undertakings. This is because educating yourself to gain opportunities within new disciplines, industries and even departments is not enough to satisfy the relationship requirements and, in most cases, this requirement cannot be satisfied retrospectively.
So, you have cleared the first hurtle and your education has a direct relationship with your employment. Now the question becomes, what is and is not claimable?
In short, you can claim any expense that is incurred as a direct result of undertaking education or training if it meets the relationship conditions covered above. Beyond the obvious course fees, this includes expenses such as fares, registration costs, the use of your personal motor vehicle, the purchase on books, stationary, and supplies. Even accommodation and meals if the event requires overnight travel. The ATO breaks all these expenses in four categories.
The first is general expenses. This category includes textbooks, stationery, student union fees, student services and amenities fees, course fees, public transport fares and all other expenses that don’t fall into one of the following categories. This is also where you can claim a portion of all your motor vehicle expenses, if you have kept a 12-week logbook to show how the ‘education’ related portion has been calculated (if you don’t have logbook, you may still be able to claim the Cent per kilometre method outlined below).
Misconception #2 – “If I pay upfront for my university tuition, I can automatically claim it as an education expense”
This is false. Most Australian citizens will receive a Commonwealth Supported Place (CSP) at an Australian university. Because these CSP tuition fees are subsidised by the Commonwealth government they are not deductable, even if you pay upfront.
The second category is for decline in value or depreciation expenses. This is where you will be able to claim a deduction for the decline in value of assets used for self-education, including computers and office equipment. Note that this section is only for the big-ticket items, any education related assets under $300 can be instantly claimed under the general expenses category.
The third category is for the repair of any education related assets and is the only one of these categories which is straightforward. This is capturing any expenses for the repairs to items of equipment used for self-education can be claimed.
The final category is for car expenses related to your self-education for which you are claiming deductions without a logbook under the ‘Cents per kilometre’ method. This allows you to claim a deduction for the following travel using your personal motor vehicle
- Either direction between your home and your place of education
- Either direction between your workplace and place of education.
Note: Only the first leg of the trip is deductible – if you went from home to your place of education and then to work, or the other way around.
To claim this method, you will simply provide us with the total number of kilometres travelled in the financial year that meet these conditions. The ATO will then allow you to claim a fixed amount (currently 85c) for each kilometre up to a limit of 5000kms.
Misconception #3 – “I forgot to keep a record of my kilometres and now I cannot claim any deduction for my motor vehicle”
This is false. To claim the cents per kilometre method you only need to be able to show that you own the car and how you work out your work-related kilometres. You do not need to have a recorded of the actual kilometres travelled.
Overall, the most important thing to keep in mind is if and your education has a direct relationship with your employment. After that it is best to simply keep a record of you expenses with some notes on the context surrounding the purchase so we, your tax accountant can advise you on the rest.
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