As an employed professional or small business owner, being an active member in industry associations and professional organizations can help expand your professional network and keep you up to date with the latest skills, tools and knowledge in your field.
Did you know that under the Australian tax system, you may be able to claim the costs of annual membership fees, professional organisations and other expenses related to your memberships as a tax deduction and pay less tax? By properly documenting these costs and understanding the taxation rules around professional memberships, you could potentially reduce your taxable income and take advantage of an often overlooked tax deduction available to self-employed individuals and businesses.
Eligible membership fees – Which types of memberships qualify for deductions?
Eligible membership fees refer to the types of memberships that are considered tax deductible under the Australian taxation system. Generally, membership fees paid to industry associations, professional organizations and unions that are related to your current occupation or business activities qualify for a deduction. This includes memberships that help you maintain or increase the knowledge, skills and qualifications relevant to your industry.
For the self-employed, memberships in associations connected to the industry of their business or current are deductible. This include accountants claiming fees for accounting bodies and membership in industry groups, doctors claiming medical association fees, and tradespeople deducting union dues. The membership must be geared towards generating assessable income or necessarily incurred in carrying out an income-producing activity to be eligible.
Timing of claims – Can you claim the full membership fee upfront or do you need to pro-rate it over the membership period?
You can claim the full cost of the membership fee as a deduction in the year you paid it, provided you’re entitled to claim the deduction.
Union fees, subscriptions to associations and bargaining agents fees
Many industries have professional bodies that members can deduct fees and subscriptions for. This includes trade unions, as well as associations and organizations relevant to your profession. Fees paid to unions can be claimed as a tax deduction. You can also deduct payments made to a bargaining agent to negotiate a new enterprise agreement or award with your employer on your behalf.
However, not all union fees are deductible. Payments made to strike funds can only be claimed if the sole purpose of the fund is to improve members’ wages through negotiation – not to provide financial support during industrial action.
In addition to industry-specific memberships, you are entitled to claim up to $42 per year for the cost of subscriptions to trade, business or professional associations that are not directly related to earning your employment income.
Most reputable unions and associations will provide members with documentation detailing the breakdown of deductible versus non-deductible fees and payments for the financial year. Keeping these statements is important for substantiating membership fee deductions at tax time.
Professional memberships and accreditations
Many professions require annual renewals of licenses, memberships or certifications in order to legally conduct work activities. The costs of renewing these qualifications can generally be deducted if they relate directly to your current employment. Examples include trade licenses for tradespeople, crane operating certifications, responsible service accreditations for hospitality staff, and registration renewals for occupations like nursing, teaching and medicine.
However, the initial outlay for obtaining qualifications is not tax deductible. This is because the primary purpose of incurring these upfront costs is to enable you to enter into an occupation – they are not strictly considered employment expenses. For instance, the initial fees for trade licensing exams or initial teacher training certifications would not be deductible.
The ATO also specifies that in order to claim a deduction, the membership, license or accreditation renewal must be required for your current job and employed status. If the qualifications are no longer relevant due to a change in occupation or employment situation, the costs cannot be deducted. The expenses must have a clear link to income earning activities in the relevant financial year.
Working with children check
Working with children checks are mandatory screenings that must be obtained or renewed for many jobs involving contact with children. The costs of maintaining a valid working with children check can generally be included as a tax deduction in certain circumstances.
For existing employees, renewing a working with children check is deductible as the screening is compulsory for continuing employment. Similarly, if a new role requires a current check, obtaining one is considered an employment expense.
However, the initial application for a working with children check is not deductible for new employees. This is because the primary purpose of the initial check is to gain entry into child-related work – not an expense incurred from existing employment activities.
The only exception is if a new employee’s recent work history prior to the new role has been in continuous child-facing employment. In this scenario, the initial check renewal may be deductible as it directly enables ongoing income-earning. But generally, the first-time fee is a non-deductible capital cost rather than a work-related expense.
Being an active member of relevant professional organizations and industry associations can provide many benefits for expanding your professional network and keeping up to date with the latest developments in your field as well as reducing your taxable income. Consulting with a qualified tax agent can help ensure you are maximizing allowable deductions and complying with all ATO guidelines when submitting your return. A tax agent has expertise in analysing expenses like membership fees and structuring deductions to the taxpayer’s best advantage. Taking advantage of this tax break could mean hundreds of dollars back every year. So be sure to speak to your tax agent about memberships to check your eligibility and get the most out of this opportunity.