Time and time again, people continue to be confused as to what precisely constitutes self-education expenses, and how the claim is calculated – with some unknowingly making incorrect claims and others, who may have a legitimate claim, failing to include it in their tax returns.
Might an expense be considered deductible where a senior government architect embarks on an overseas tour devoted to the study of architecture? Similarly, could a taxpayer who partakes in a self-guided, educational discovery tour throughout Europe claim the tour as a deductible expense if it helps him obtain a promotion to head of faculty? The answer to the two hypothetical situations above is a deep, resounding ‘Yes’.
It is important to understand what falls under the work-related self-education expense (SEE) definition as the Tax Office will review your claims if they fluctuate substantially from year to year, or are significantly greater than what is deemed average. To help you keep up-to-date with what costs fall under the SEE definition, we have provided the following guide that contains categories of SEE expenses, common costs under deductible SEE and situations where SEE is not deductible.
Categories of self education expenses
There are essentially three types of expense categories:
• costs incurred by a taxpayer to undertake a course of study at a school, college, university or other recognised place of education
• costs incurred by a taxpayer to keep up to speed with developments and methods relating to their field of employment, and
• study costs incurred by a full-time student to satisfy study requirements to maintain eligibility for Austudy, ABSTUDY or Youth Allowance.
So how do you know if the circumstances in which you incurred these expenses are those where SEEs are deductible? In the case of the architect above, SEEs were deducible because the overseas tour dedicated to the study of architecture upgraded the qualifications of the architect’s current employment and improved specific skills or knowledge used in that employment.
In the case of the head of faculty who partook in a self-guided educational discovery tour, SEEs were deductible because the taxpayer showed that at the time he was working and studying, the self-education course led, or was likely to lead, to an increase in income from existing employment.
Trainees are not precluded from incurring SEE deductible expenses if they undertake a self-education course as part of a traineeship. If the incurred costs upgrade the qualifications, improve the specific skills and knowledge, or is likely to lead to an increase in employment income – these costs are considered deductible SEEs.
Common costs under deductible Self education expenses
Below are some of the common costs that may make up deductible SEEs:
• course or tuition fees to attend an educational institution or work-related conference or seminar
• the cost of professional and trade journals and text books
• depreciation of items used for self-education purposes such as technical instruments and equipment, computers, calculators, professional libraries, filing cabinets and desks etc.
• student union fees
• computer expenses (interest, repairs, depreciation)
• running expenses (heating, cooling, lighting of a room set aside for self-education purposes)
• interest incurred on funds borrowed to pay for self-education, and
• allowable travel expenses (airfares incurred during study tours, sabbaticals, work-related conferences and seminars; meal expenses; travelling costs to and from home and taxpayer’s place of education).
Travel expenses that are deductible Self Education Expenses
The following table sets out the circumstances in which travel expenses are deductible as self-education expenses.
Situations where Self Education Expense is not deductible
Can a public service clerk studying for a law degree claim SEE deductible expenses? Can a mining engineer obtaining an MBA? The answer to both questions is typically ‘No’. Deductibility was denied in the aforementioned two circumstances because the SEEs were incurred to obtain employment, new employment or to open up a new income-earning activity and therefore incurred ‘at a point too soon’ to be regarded as gaining or producing assessable income.
Other situations where SEEs are not deductible include:
• certain higher education contribution payments
• meal costs while attending an educational institution, work-related conference or seminar where the taxpayer is not required to sleep away from home
• accommodation and meal costs where a taxpayer travelling to another location for self-education purposes has established a new home
• accommodation and telephone costs where a postgraduate is studying overseas
• childcare costs while taxpayers attend lectures or engage in other self-education activities, and
• costs associated with attending a taxpayer’s graduation ceremony.