How to claim self-education as a tax deduction

In today's rapidly evolving world, the importance of continuous learning and self-education is incredibly important. As technology advances and industries undergo constant transformations, individuals must adapt and acquire new skills to remain competitive in the job market. Recognizing the significance of self-education, the Australian Taxation Office (ATO) provide tax incentives to encourage individuals to invest in their own learning and development.

What Are Self Education Expenses?

Self-education expenses encompass the various costs incurred by individuals in their pursuit of knowledge and skills outside of formal educational institutions. These expenses can include the fees associated with undertaking courses at educational institutions, regardless of whether these courses lead to a formal qualification.

Expenses related to attending work-related conferences or seminars are also considered self-education expenses, as is self-paced learning and study tours, both within Australia and overseas. Self-education expenses cover a wide range of educational activities that individuals undertake to enhance their knowledge and abilities in their chosen field.

Are You Eligible To Claim?

To be eligible for a deduction, a self-education expense must have a direct link to generating income from your employment. This connection can be established in two ways:

1. the expense should contribute to maintaining or enhancing the specific skills and knowledge necessary for your job.
2. it should have the potential to increase your income from your employment either immediately or in the future.

Your employment activities refer to the responsibilities and tasks outlined in your duty statement, which define the expectations of your role. By meeting these criteria, you can claim deductions for self-education expenses that align with your employment and professional development.

When Aren’t You Eligible?

You are ineligible to claim a deduction for a self-education expense if certain conditions are not met at the time the expenses are incurred:

1. the expense must have a direct and sufficient connection to your current employment activities. If there is no clear link between the expense and your job responsibilities, it cannot be claimed.
2. if you are not currently employed, you cannot claim deductions for self-education expenses.
3. if the expense only relates in a general way to your employment activities, such as pursuing a full-time fashion photography course while working as a casual sales assistant on weekends, it is not eligible for deduction.
4. expenses incurred for the purpose of obtaining new employment or transitioning to a different occupation or position even if it is with the same employer, are also not deductible.

Quick Check List of Non Tax Deductible Self-Education Expenses

• child care costs related to attendance at lectures or other self-education activities
• travel expenses for the last stage of travel from your home to place of education and then to your workplace, or workplace to your place of education and then to your home
• repayments of study and training support loans such as?????

-Higher Education Loan Program (HELP), including FEE-HELP and HECS-HELP

-Student Financial Supplement Scheme

-VET Student Loans

-Student Start-up Loans

-ABSTUDY Student Start-up Loans

-Trade Support Loan Program

Pro Tax Tip: You can’t claim fees paid by an employer or fees a third party has reimbursed you for.

So, What Can You Claim As Self Education Expenses????????????????????????????????????????????????

If your self-education expenses meet the necessary criteria, you are eligible to claim deductions for various types of expenses. These include tuition fees, course fees, conference or seminar fees, and general course expenses.

You can claim a deduction for the decline in value of depreciating assets used for self-education purposes. If you incur transport expenses, such as car expenses, while attending self-education activities, these can also be claimed. If your self-education requires you to travel and stay away from home for one or more nights, you can claim accommodation and meal expenses. Interest on borrowings related to self-education can also be deducted.

Specifically, for tuition fees, you can claim a deduction if you are enrolled in a full fee paying place at a university or other higher education institution. Deductible course or tuition fees are incurred when the debt becomes a legal obligation that you need to pay. This includes fees paid with the assistance of a FEE-HELP loan or VET Student Loan (formerly known as VET-FEE HELP). However, voluntary or compulsory repayments of these loans cannot be claimed as deductions in your tax return.

Quick Check List of Tax Deductible Self-Education Expenses

• Tuition fees
• Textbooks
• Stationery
• Student union fees
• Student services and amenities fees
• Public transport fares
• Car expenses worked out using the 'logbook' method (other than the decline in value of a car)
• Car travel to the course using the cents per km method
• Running expenses for a room set aside specifically for study
• Decline in value (depreciation) deductions for items such as a computer, desk, or car
• Repair costs to assets used for self-education purposes
• Computer consumables – for example, printer cartridges
• Equipment repairs – for example, the cost of repairing a computer
• Internet and data usage (excluding connection fees)
• Phone calls
• Postage
• Stationery
• Student union fees
• Textbooks
• Trade, professional, or academic journals

Depreciation of Self-Education Assets

When it comes to self-education expenses, you’ll need to take into account the decline in value of depreciating assets. A depreciating asset refers to an asset that diminishes in value over time. You have the opportunity to claim a deduction each year for the decline in value, also known as depreciation, until the asset's value reaches zero. This period is referred to as the effective life of the asset.

For work-related self-education purposes, you can claim a deduction for the decline in value of various assets. These assets include computers, professional libraries, desks and chairs, filing cabinets and bookshelves, calculators, technical instruments and tools, and other equipment like desk lamps.

If the depreciating asset you purchase costs $300 or less, you can claim the full cost of the asset in the year of purchase, provided you use it for work-related self-education or in the process of earning other non-business assessable income during that income year. However, if you also use the asset for private purposes, you will need to apportion your claim accordingly.

If the depreciating asset you use for work-related self-education exceeds $300 in cost, you can claim a deduction for its decline in value over its effective life.

Pro Tax Tip: If you bought the asset partway through the income year or use it partly for private purposes, you must reduce your claim accordingly.

What About The $250 Excess?

For Self-education expenses incurred before July 1, 2022, the first $250 of expenses generally cannot be claimed, however that rule has now changed.

Starting from July 1, 2022, there have been changes regarding the deduction of self-education expenses. If you are claiming a deduction for self-education expenses incurred on or after this date, you are no longer required to reduce your allowable expenses by $250. Instead, you can claim a deduction for all allowable self-education expenses without this reduction.

However, if you are claiming a deduction for self-education expenses incurred before July 1, 2022, you may still need to reduce your allowable expenses by $250. This means that for the 2021-22 or earlier income years, you may be required to reduce your self-education expenses accordingly.

Pro Tax Tip: You’ll need to apportion your expenses between private and study use. For example, if you claim your laptop, you’ll need to work out the usage for study and your private time surfing the web.

Self-education plays a vital role in today’s knowledge-based economy. As you may take control of your education when it comes to expanding work opportunities, don’t forget to claim as many self-education expenses as you can. ITP Tax Agents will help you work out every single tax deduction you can make – even those you don’t know about. Even better, the cost of your appointment is also a tax deduction that can be claimed in your next years’ tax return. Phone 1800 367 487 and book your appointment today.