Self-education: What can you claim?

The Australian Taxation Office have released a new draft ruling on self-education expenses. We revisit the deductibility of self-education expenses and what you can and can’t claim.

If you undertake study that is connected to your work you can normally claim your costs of that study as a tax deduction – assuming your employer has not already picked up your expenses. There is also no limit to the value of the deduction you can claim. While this all sounds great and very encouraging there are still issues to consider before claiming your Harvard graduate degree, accommodation, and flights as a self-education expense.

Clients are often surprised by what cannot be claimed. Self-education expenses are not deductible if you are undertaking the education to obtain a new job or something not connected to how you earn your income now. Take the example of a nurse’s aide who attendees university to qualify as a registered nurse. The university degree and the expenses associated with degree are not deductible as the nursing degree is not sufficiently connected to their current role as a nurse’s aide.

The ATO have recently released a new draft ruling on self-education expenses. While the ruling does not introduce new rules, it does reinforce what the ATO will accept…and what they won’t.

Personal development courses

While not always the case, one of the key challenges in claiming deductions for self-development or personal development courses is that the knowledge or skills gained are often too general. Take the example of a manager who is having difficulty coping with work because of a stressful family situation. She pays for and attends a 4-week stress management course.

In that case, the stress management course is not deductible because the course was not designed to maintain or increase the skills or specific knowledge required in her current position.

When your employment ends part the way through your course

If your employment (or your income earning activity) ends part the way through completing a course, your expenses are only deductible up to the point that you stopped work. Anything from that point forward is not deductible (that is until you obtain a new role and assuming the course remains relevant).

Overseas trips with some work thrown in

Overseas study tours are deductible in limited circumstances. If you are travelling overseas, you need to prove that the dominant purpose of the trip is related to how you earn your income. Factors that help demonstrate this include the time devoted to the advancement of your work related knowledge, the trip not being merely recreational, and that the trip was requested by or supported by your employer. The ATO are strict on this. Take the example of a senior lecturer in history at a University. He takes a trip to China with his wife while on leave over the Christmas break to update his knowledge on his area of academic interest. While his job does not require him to undertake research, he incorporated some of the 600 photos he took and some of the learnings from the tour into the courses he teaches. Despite having a relationship to work, the trip is not deductible as, while relevant in some ways to his field of activity, it is incidental to the overall private and recreational nature of the trip.