Self-education: What can you claim?
Knowing what you can and can’t claim is important. That’s why we’re providing a run down on the latest draft ruling by the ATO which outlines what you can and can’t claim for self-education expenses.
When undergoing study in direct relation to your job (assuming the expenses have not already been paid by your employer), the costs of that study are normally able to be claimed as tax deductible. Limits are also not placed on the value of the deduction that can be claimed.
As enticing as this sounds, there are still some key considerations that need to be taken into account. Here we do a deep dive into the “yes” and “no” list of what can and can’t be claimed.
Undertaking study un-related to your current job or role
You might be surprised to learn that self-education expenses are not deductible if you are undertaking the education to pursue a new job which is not related to your current stream of income. One example may be an assistant nurse who also attends university in order to qualify as a registered nurse. The degree and related expenses would not be able to be claimed as tax deductible, as the nursing degree is not directly related to their current role as an assistant nurse.
Personal development courses
This is a tricky one, however, for many personal development courses, the skills and knowledge acquired are too general in nature to quality. Personal development courses need to be specifically related to increasing your skillset or knowledge within your specific role. Take, for instance, a manager who may be having difficulty coping with her work and life balance, due to stressful family circumstances. If she was to undergo a professional development course in stress management, this could not be claimable, as the course was not designed to further her skills or knowledge specific to and required in her current position.
Employment which ceases halfway through a course
If completing a course and your job or income-earning activity ceases halfway through completion of this, expenses will only be deductible until your last day of employment.
Combined overseas work and holidays
For this one, we are referring to work conferences, where a few days are spent in sessions, and then a day (or more) are spent sightseeing or vacationing. To be claimable, the dominant purpose of the trip needs to dedicated to work. If leisure time is provided within the course itself, such as an afternoon tour or sightseeing, this is incidental to the conference itself, and the expenses of the conference are fully tax deductible.
Extensions to work conference dates are not however considered incidental. Therefore, you would need to apportion the expenses and claim those only directly related to the conference. For example, for a conference lasting three days, and three days spent holidaying afterwards, only expenses relating to the conference could be claimed (assuming these were not covered by your employer). An even divide between attending the work conference and holidaying also means that half the airfare could be claimed, with the same rule of thumb applying to the division of time spent between conferences and recreation.
Partial deductions for courses
For a course which is not entirely deductible, a portion of the study fees where subjects or modules are sufficiently related to your employment or income can be claimed. In such cases, the course fees would be apportioned. One example might be an architect who is completing their MBA. The whole course would not qualify as there is not a sufficient connection to their current role as an architect for the whole course to be deductible. However, the expenses relating to the project management subject within that course, would qualify as tax deductible.
Thinking about government assistance for study
Unfortunately, Commonwealth supported places for study do not quality.
If you are a full-fee paying student who is using a FEE-HELP loan to pay for the fees of their course. The fees will be deductible if directly related to current income.
Large claims – something to think about
Whilst there is no limit on the amount that can be claimed as a self-education expense, the ATO is more likely to keep a closer eye on larger self-education expenses. For anyone who has completed post graduate courses, you would know how quickly those courses and the additional expenses of books, placements and travel can add up. It’s worth considering whether there is a clear connection between your current work or role before commencing a course and whether whole, or part of this will qualify.
If needing to purchase airfares in order to attend a self-education course and you do not live at the location it is offered, this is able to be claimed as they are part of the cost of undertaking self-education activities.
Need some advice on what you can and can’t claim? Reach out to us HERE and we can help.