What Education Expenses Are Deductible?
Education expenses are deductible for tax purposes where they have a relevant connection to your current income earning activities. This could arise in 1 of 3 ways:
- The course maintained or improved your skills or knowledge required for your current work activities; or
- You can show that the course was leading to, or was likely to lead to, increased income from your current work activities; or
- Other circumstances exist which established a direct connection between the course and your current work activities.
Specifically, the following education expenses are not deductible because they lack the relevant connection to your current income earning activities:
- Course to obtain new skills in order to get employment in a different field of work or to open up a new business opportunity (e.g. An accountant studying to become a teacher);
- Course is too general or relates to a non-income producing purpose (e.g. Some types of personal development courses).
Classification Of Expense As Work Expense or Self-Education Expense
Some types of education expenses are classified as work related expenses and are deductible outright. Other types of education expenses fall into what the ATO calls “self-education expenses”. In the second category, generally only the net amount of the self-education costs exceeding $250 can be deducted. So what is the difference? We answer that question in this article. It is important to remember though that the education expense needs to satisfy the relevant work connection to be deductible, whether it is classified as a work expense or self-education expense.
Education Expenses Treated As Work Expense – Deductible Outright
Short term refresher courses, in-service activities or short term development courses are generally classified as work expenses. These are considered to be more akin to on-the-job training, which are deductible outright (provided the relevant connection to work exists). In particular, the ATO have confirmed that the following education expenses should be classified as work expenses, in which case the $250 threshold does not apply:
- Formal education courses provided by professional associations;
- Professional seminars, education workshops or conferences connected to work.
Self-education expenses – $250 Threshold Applies
Costs that are classified as self-education expenses are the costs related to a course that you do to obtain a formal qualification from a school, college, university or other place of education. The nature of education courses to which the $250 threshold applies require an element of continuity and ongoing instruction or training.
Provided the relevant work connection exists, costs that you can deduct under this category (after excluding the first $250) include:
- Tuition fees payable under FEE-HELP or VET-HELP;
- Other course or tuition fees charged by the education institution;
- Costs of textbooks, stationery and photocopying of course-related material;
- Student union fees;
- Depreciation of equipment used in the course (e.g. computer) – apportioned between private use and use for self-education;
- Heating, cooling and lighting costs if a room is set aside for work-related study purposes
- Expenses for travel in either direction between:
Your home and your place of education;
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.)
Non Deductible Costs
Some costs are not deductible either as a work expense or self-education expense, even if the course relates to your work
. These include:
Payments you or the Australian Government makes to HECS-HELP or repayments you make under HELP or SFSS.
Meal costs while attending an education institution, work related conference or seminar where you are not required to sleep away from home
Childcare costs while you attend lectures.
If you require any assistance with preparing your tax return or determining whether your education are deductible, please do not hesitate to contact us on (02) 9713 1199