How To Claim Self-Education Expenses As A Tax Deduction

‘An investment in knowledge pays the best interest’ – Benjamin Franklin

The quote above is certainly true, especially when you’re looking to increase skills for your current job, or hoping to level up and take on more responsibility with your current role. An investment in knowledge not only improves your mind and your employment prospects – it can also reduce your taxable income.

Education can require costly resources, and if you’re studying for your current job either to extend your skills or to remain current, these costs can be claimed as tax deductions. The Australian Taxation Department (ATO) stipulates that the course you study:

  • maintains or improves the specific skills or knowledge you require in your current employment activities
  • results in or is likely to result in, an increase in your income from your current employment activities.

If your chosen course doesn’t connect to your current employment or only relates in a general way or if you’re studying to gain employment in a different area, the ATO deems these courses expenses as private and not claimable.

Pro Tax Tip: If your course maintains your right to a taxable bonded scholarship, you can claim course expenses as tax deductions.

What Can You Claim?

If you’ve had to travel to undertake your course which requires you to stay overnight, your accommodation and meals expenses are legitimate claims if not paid by your employer or you have not been reimbursed.

Car expenses, such as petrol, tolls and parking can be claimed, as well as computer and computer consumables such as ink, stationary and paper. If you’ve bought equipment for the course, assets can be claimed immediately if they’re under $300, or depreciated if they’re over $300. Repairs, maintenance and cleaning of your equipment are legitimate claims.

The educational institution’s fees, books, subscriptions, journals can be claimed. Any student and amenity fees are also tax deductable.

Pro Tax Tip: If you study at home, you’ll be able to claim home office expenses such as lighting, heating, cooling as well as phone and internet expenses.


What Can’t You Claim?

Not all costs associated with education are eligible to be claimed. First and foremost you must be able to prove the connection of the chosen course to your job. There has to be a clear distinction between updating skills you need for your current job versus upskilling for future employment, for example a nurse studying to become a doctor. Although both careers are in the medical field, they are distinctly different professions and therefore a claim could not be made in this instance.

Tuition fees paid by someone else. You can claim costs for your education if you’re personally out of pocket only. If the course has been paid by your employer, or you’ve been reimbursed by your employer, you can’t claim a tax deduction.

Repayments of loans under the Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS), the Student Startup Loan (SSL) or the Trade Support Loans Program (TSL) cannot be claimed.

Rent, mortgage interest and rates can’t be claimed, even though they are home occupancy expenses.

Pro Tax Tip: If you run a small business from your home, you may claim occupancy expenses, however Capital Gains Tax may be liable upon the sale of the property.

Accommodation and meals. You can claim those expenses if you’ve had to travel away from your home for a short period of time to attend a residential school for your study overnight.

Apportioning Expenses Some of the equipment and materials you need to purchase for your study may have a private use as well as a study or business-related purpose. For example, you may purchase a laptop, but also use it privately. In these instances, you’ll need to apportion the expense based on business versus private use and claim only the business portion of the cost of your equipment.


Depreciating Assets

For equipment and tools purchased over $300, you’ll need to depreciate the asset over a few years. These are items such as computers, tools for a trade, office equipment such as desks and chairs, professional equipment. The ATO has a list for depreciating certain tools and equipment that must be depreciated over a select period of years. At the end of the depreciating time period, the item cannot be further claimed as it’s deemed at the end of its useful life cycle.

$250 Reduction In Expenses

The $250 rule can be a little complicated. In some cases, the first $250 of expenses cannot be claimed. This includes items you could normally claim, such as books, stationary, tuition and student fees, travel and car expenses, however the $250 can be offset with expenses such as:

  • childcare while attending educational activities
  • capital expenses on items you’ve had to purchase for your course
  • fares, travel and car expenses
  • the work-related leg of your journey to your course, including travel to the course from your place of employment, or from your course to the place of your employment
  • recipients of a taxable bonded scholarship

Keep Your Receipts

Don’t forget, you’ll need to back up your claims with proof. Keep your receipts, tax invoices, financial statements and any correspondence relating to your course when it comes time to claim your expenses. Store your records for 5 years in case of auditing. The ATO can query claims and request proof at any time.

Pro Tax Tip: Electronic records can be kept if they are a true and fair representation of the original. If you’d like to know more about how you can claim your self-educational expenses, an ITP tax professional can help you claim all your deductions. Phone 1800 367 4786 and talk to a professional today.