Self-education goes a long way when it comes to furthering your career. Whether or not you’re looking to strengthen your skill-set, need to update your knowledge or need to train to keep current, there’s a whole lot of tax deductions that cam be claimed when you need to up-skill.
You’ll need to make sure you’re eligible to claim any sort of self-education tax deduction. The biggest factor in eligibility is that your course must directly related to your employment. The course must enable you to maintain or improve the specific set of skills or knowledge you need to do your current job. Any study you take to apply for another job role, or move into another role is considered to be a private expense. Your course must result in an increase in your income from your current employment.
If your course doesn’t have a sufficient connection to your current job or work activities, or only related in a general way, or enables you to move to new employment, then the expense is private. For example, you can’t work as a nurse and claim your degree to become a doctor.
Taxable Bonded Scholarships
Some scholarships are taxable. This means that you’ll need to lodge a tax return and declare your tax withholding at tax time. You can advise your scholarship provider to take tax out regularly so you’re not hit with a big tax bill at the end of the financial year. Provide your Tax File Number to them to claim the tax free threshold if applicable. You’ll need to show the scholarship amount as assessable income in your tax return.
You can claim tax deductions if you’re being paid a taxable bonded scholarship if you’re satisfying the requirements to maintain the right to receive the scholarship.
The $250 Rule
You generally can’t claim the first $250 of self-education expenses, however you can claim expenses that are not categorised specifically as self-educational. The following claims can be used to offset the initial $250 you’re out of pocket for:
- Child care whilst attending classes
- Capital expenses such as the purchase of a desk, laptop or chair
- Fares, travel or car expenses you’ve incurred to get to your classes. If you travelled from your work to your classes, or from classes back to your work, you can claim travel expenses between places
- Those who have received a taxable bonded scholarship and are not an employee of the scholarship provider, you can claim travel from your home to your place of education and back
Pro Tax Tip: Pre-paid self-education expenses can be claimed in the same financial year in which you paid, even if your study starts in the new financial year. Pre-paying expenses can be a great way to keep your income tax down.
There are some expenses that will remain just that — expenses. You’ll need to decide if the cost is worth it when you undertake some more study, however it’s good to know what you can’t claim so you can make an informed decision.
You can’t claim:
- Tuition fees paid by someone else, or any fees that you’ve been reimbursed for
- Student contribution amounts
- Repayment of student loans. This includes Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS), VET Student Loans (VSL), Student Start-up Loans (SSL) and Trade Support Loan programs (RSL)
- Home office occupancy expenses such as rent, mortgage, interest or rates
- If you’ve received an Australian Government Allowance or payment from 2011-2012 onwards
- Accommodation or meals unless you’re studying away from home
Now that we’ve got the nitty-gritty out of the way, let’s take a look at what you can claim. There are three areas:
- General course expenses
- Depreciating Assets
- Car expenses
General Course Expenses
You can claim most general course expenses, starting with meals and accommodation if you’ve had to travel away from home or overnight to undertake your course. Plane, bus and taxi fares to facilitate your overnight travel can also be claimed.
Your car travel is claimable if you’ve had to travel from your place of work to the educational facility, or vice versa. This includes petrol, road tolls, and parking. Keep a car logbook and note the date, odometer reading, kilometres travelled and reason for your travel.
When you study, you’ll need tools to study with. If you’ve had to shell out for a computer, laptop or study tools and consumables such as stationery, printer cartridges, textbooks and trade and professional journals, all these expenses can be claimed. Cases for your laptop and safety clothing also qualifies. You’ll also be able to claim the decline in depreciating assets for tools costing over $300. Repair, maintenance and cleaning of equipment are valid claims.
If you find yourself needing to study at home, the space you create as well as running costs such as phone and internet can be claimed.
Pro Tax Tip: Your tax agent will let you know how long to depreciate assets and set a depreciating schedule for you.
If you’re out of pocket for your course fees and tuition, interest on loans and educational student union fees, then these are all claimable.
Pro Tax Tip: Don’t forget to keep your receipts, travel and car logbooks and work diaries to back up your claims.
Larger cost items that need to be bought should be depreciated. This rule applies to tools and equipment bought over $300. This rule applies to single items, however if you need buy a set, such as a set of DVD’s, a tool that has several attachments to be able to be used then the set is categorised as a single item.
Pro Tax Tip: If the item is $300 or under, an immediate deduction can be claimed for the full cost.
If you use the item privately, you’ll need to apportion the private versus work use and claim accordingly. For example if you’ve bought a computer and use it for your course 60% of the time, and use it the rest of the time to stream Netflix and play online games, then that is considered to be private. You’ll only be able to claim 60% of the cost when it comes to tax deductions.
Pro Tax Tip: An upgrade to an existing computer is a part of your ongoing depreciating schedule. An upgrade is not considered to be a repair.
Most people who work will need their car to get to their course. You’ll be able to claim the trip to and from work to your educational facility. Travel to and from your work or educational facility straight from your hoe cannot be claimed. The Australian Taxation Office (ATO) deems this travel as private in nature and is a private expense.
If you’re unsure what to claim when it comes to education, a chat with an ITP Accounting Professional can clear up some doubts. Phone 1800 367 487 and chat with a friendly professional today.