Chartered accountant GAIL FREEMAN says that when it comes to tax deductions for self education, there are 38 ATO examples to make things easier, but even then…

A new ruling was issued recently that sets out how to claim self-education expenses in your tax return. 

For the purposes of the ruling, self-education expenses include courses undertaken at an educational institution whether you get a qualification or not, courses that are provided by a professional or industry organisation, attendance at work-related conferences or seminars and self-paced learning and study tours whether in Australia or overseas. 

It covers many of the issues that we accountants often come across. There are 38 examples that make it easier to see if your situation is covered and how the ATO will apply the rules to your particular situation.

In short, there must be a connection between the expenditure incurred and your income-earning activities. 

When I am querying self-education claims with clients I’m often told: “My employer gives me time off”, or “my employer pays for part of the cost”. That does not confirm that the expenses are tax deductible. That confirms that your employer supports self-education, which is quite different.

Spelt out in the ruling is the principle that if your income-earning activities arise from exercising skill or particular knowledge and the self-education expenses enable you to maintain or improve that skill or knowledge and/or the course objectively leads to or is likely to lead to an increase in your income from your current income earning activities in the future, then the costs are likely to be deductible.

The ruling also reiterates the well-known exclusions, which are that if the course enables you to obtain employment when you are not employed or to obtain employment or to open up a new income earning field even in business or your current employment they are incurred at a point too soon to be regarded as deductible. 

And/or you are not undertaking income-earning activities at the time you incurred the expense they are, therefore, not connected to earning your income and, as such, they cannot be claimed.

We often see clients who want to claim stress-management courses as their job is stressful and they are having a stressful time at home with their family so they think the course might improve their overall performance in every area of their lives. The ruling clearly states that this cost is not deductible. 

Another example explains the situation of an academic who goes overseas with his partner and does research into historic buildings. The ATO says that research is not part of his job therefore it is a private course. 

Again, we see people who go overseas and say they researched buildings. The ruling clearly states that unless you’re looking at them with a specific purpose you do not have a claim. General building research is not sufficient.

The ruling further clarifies a few situations where people travel overseas for longer periods of time. If the taxpayer goes overseas with their family and they rent long-term accommodation that will preclude a deduction as it is considered that they have relocated for the period of the course. However, if there is only short-term accommodation and only short-term leases the accommodation costs should be allowable assuming that all other relevant criteria are met. As always it is a question of fact in each case. 

If you are travelling to undertake a course of self-education or undertaking a course of self-education you will need guidance on your claim. 

Contact the experts at Gail Freeman & Co for help and clarification on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.