Making sure your Self Education is actually deductible

Posted on 2nd July 2019 by Tom Francis

It’s July once again and at GeersSullivan that means one thing above all else, individual tax returns are coming! Over the past few years we have seen an increase in the number of warning letters issued by the ATO where taxpayers have a higher level of deductions than their peers.  

One of the chief drivers of high deduction claims is self-education expenditure; at this item taxpayers are allowed to claim for courses and seminars attended, as well as travel costs and related study expenses such as stationery, internet access and even depreciation. The key to claiming these items is that the study “must have a sufficient connection to your current work activities as an employee” and: 

• maintain or improve the specific skills or knowledge you require in your current work activities, or 
• result in, or is likely to result in, an increase in your income from your current work activities. 

The two most common errors when determining if education expenses meet the above tests are: 

• the study is only generally related to the taxpayer’s employment and lacks the relevant connection; 
• the study enables them to gain new employment. 

For a course of study – such as a certificate or similar formal qualification – to be deductible, the skills and knowledge you are acquiring need to have a strong connection with your current employment. In the case of a certification or formal schooling this means: 

• You will directly apply the skills being taught in your current employment, or 
• The skills being taught will enable you to take on a more senior role in your current profession, or 
• You are obtaining additional knowledge about your area of expertise and this will assist you in performing your role or in obtaining a more senior role in the same profession 

An example of this is a nurse who undertakes studies to become a nurse practitioner with the ability to prescribe some medications. He or she is likely able to apply for more senior roles but the study maintains the specific connection to the profession of nursing.  

In contrast a taxpayer employed in an internship role would not be able to claim their course fees against their income earned as an intern. This is because the study is not being undertaken for the purpose of gaining employment as an intern and is therefore in relation to gaining new employment. 

In the case of a seminar, conference or similar event having a strong connection to your employment means: 

• The topic being presented on is directly related to your area of expertise, or 
• The issues being discussed or the planned outcomes have a direct relationship to your area of expertise or how your industry operates. 

Revisiting our example of the nurse, if he or she attends a two-day seminar on best practice methods for caring for patients suffering a particular ailment this would have the necessary connection to their employment. Similarly, a conference on the impact of changing legislation on nurses’ professional conduct will also have the necessary connection. 

On the other hand, a seminar that presents the results of a new medical device or the impact of a particular disease on the population is likely to be too general to be considered in relation to the nurse’s employment. Put plainly the topic does not directly impact the taxpayer’s work as a nurse. 

We encourage anyone who is considering further study and believes the course to be tax deductible to consider the points of this article carefully. If in doubt, please feel free to call us to discuss on (08) 9316 7000.