Changing technology and evolving workplaces means that at some stage in your life, an educational upgrade could become necessary. Fortunately, our tax system is set up to provide some breaks to help you out with the cost of your studies.
To be eligible for a tax deduction, the expenses must relate to a course which is directly related to gaining further qualifications in your current profession, business or trade.
Remember, if your total claim for all expenses exceeds $300, you must keep written evidence to prove the expenses were actually paid by you. Make sure you keep all your receipts and logbooks safe and up-to-date so tax time doesn’t mean searching through bank statements, emails, or the glove box.
When can you claim work-related self-education expenses?
You can claim self-education expenses if there is a direct connection between the course and your employment.
According to the ATO, you must satisfy one of these four conditions. You need to be:
- Upgrading your qualifications for your current role.
- Improving your skills or knowledge used in your current role.
- A trainee and the course you take forms part of the traineeship.
- Able to show the course you were studying led to, or was likely to lead to, an increase in your current salary.
If your course of study is deemed to have little relevance to your income-earning activities, the connection between them (and eligibility for a tax deduction) may not be recognised by the ATO.
You cannot claim self-education expenses if your intention is to get:
- A different job, or
- Income from a new earning activity (such as starting a new business).
Self-education expenses you can claim
Allowable self-education expenses are broken into five categories:
| Category | Allowable expenses |
| A | Tuition fees, textbooks, stationery, student services and amenities fees, student union fees, public transport fares, car expenses calculated using the ‘logbook’ method, expenses for a ‘study’ room. |
| B | Depreciation on items such as a computer, desk, or car for which you are claiming a deduction in Category A. |
| C | Repair costs for assets used for self-education purposes. |
| D | Car expenses calculated using the ‘cents per kilometre’ method. You can’t claim expenses in this category if you have included deductions for depreciation and repairs under Category B or C. |
| E | Expenses you have incurred but cannot use as a deduction. These expenses can be used to offset the $250 reduction (see below) to your Category A expenses. For example:
· capital costs of items such as a computer or desk · child care costs related to attendance at lectures or other education activities · travel expenses for the last stage of travel from your: – home to place of education to workplace, or – workplace to place of education to home |
The $250 reduction on self-education expenses
In certain circumstances you may have to reduce your allowable self-education expenses by $250.
If the total of your expenses consists solely of ‘Category A’ items, your total claim must be reduced by $250.
However, ‘Category C, D and E’ expenses can be used to offset the $250.
The formula for calculating your claim for work-related self-education expenses is:
Total claim = A − [$250 − (C+D+E expenses)]+B+C+D
If the total of (C+D+E expenses) is greater than $250 it is reduced to $0, not a negative amount.
Self-education expenses you can’t claim
You cannot claim the following expenses in relation to your self-education:
- Repayments of Higher Education Loan Program (HELP) loans
- Student Financial Supplement Scheme (SFSS) repayments
- Student Start-up Loan (SSL) repayments)
- Trade Support Loan Program (TSL) repayments
- ABSTUDY Student Start-up Loan (ABSTUDY SSL)
- Home office occupancy expenses
- Meals (unless sleeping away from home)
Travel, accommodation and meal expenses
The expenses relating to travel between your home and an educational institution and return, and between your place of work and the educational institution and return, are allowable.
For example, if you travel from home to an educational institution and then to your place of work and then return home, only the costs of the first leg of each journey are allowable. The costs of the second leg of the journey are costs incurred in getting to work, which are considered as being private in nature.
If you need to travel away from home in connection with a self-education activity, the accommodation and meal expenses incurred are generally deductible. Examples include an overseas study tour or sabbatical, or if you need to attend your educational institution for a practical component of the course or an exam. These expenses are part of the unavoidable cost of undertaking the study and are not considered private expenses as the purpose of the travel is to pursue activities to enhance income-producing abilities.
Further help:
Unsure what you can claim on this year’s tax return? Your Marsh & Partners advisor can help. You can reach us on (07) 3023 4800 or at mail@marshpartners.com.au
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