Self Education Income Tax Deductions - Changes from 1 July 2022

Self-education costs are a valuable income tax deduction for those currently studying and working in the same field.

While there may be some confusion regarding costs incurred that will qualify for a deduction, a review of the range of course fees and related costs that may be included in the claim should encourage accurate recordkeeping, including the use of home internet and telephone, or qualifying motor vehicle travel and other transport costs.

Changes from 1 July 2022:

Prior to 1 July 2022, the first $250 of self-education expenses were deducted from the total of expenses that could be claimed, with the balance being included as an income tax deduction. From 1 July 2022, all of the eligible self-education expenses incurred are able to be claimed in full.

Prior to 1 July 2022, other costs could be included to account for the first $250 of expenses, such as capital costs of equipment purchased and child-care costs. As all self-education costs are now deductible, only direct study costs will be included in any claim as a tax deduction.

Basic Rules

Some of the basis self-education tax deduction pre-requisites are:

1. Costs associated with maintaining existing knowledge, or study costs that are likely to lead to an increase in income, may be tax deductible where there is a relevant connection to the individual’s current income earning activities, regardless of whether the course is full time or part time;
2. There is no requirement that a formal qualification will result from the course of study;
3. Self-education expenses may only be claimed where a person is employed – where a course of self-education commences, but then employment ceases, only course expenses paid when a person was employed may be claimed;
4. Receipt of a government benefit or allowance that entitles a person to a beneficiary rebate, such as Austudy, do not entitle an individual to claim self-education expenses;
5. The self-education costs must relate to your current employment – you can’t claim the costs of education that are related to a different field, or may create the prospect of additional income in an unrelated field;
6. An individual may only claim expenses that have not been reimbursed by an employer or other person;
7. Where there are both private and self-education elements of the costs incurred, only the portion of the expenses that relate to the self-education are deductible.

Expenses to be Included

Which self-education expenses qualify as an income tax deduction?

1.Tuition and course fees, and work-related seminars or conferences, that relate to an individual’s current employment – the study can enable a person to keep up to date or gain a new skill, or lead to increased income, but the key is that the expense relates to the person’s existing employment. This includes university and courses at other educational institutions, FEE-HELP Loan course fees and VET Student Loan course fees incurred during the year, but not the repayments on these loans (HECS/HELP liabilities incurred are also excluded). Reminder, you are unable to claim self-education costs where you have been reimbursed for the expense;

2.General course expenses – the following list is from the ATO website:

• computer consumables – for example, printer cartridges
• equipment repairs – for example, the cost of repairing a computer
• internet and data usage (excluding connection fees)
• phone calls
• postage
• stationery
• student union fees
• textbooks
• trade, professional, or academic journals

3.Depreciation of assets used in your course, such as computers and laptops. Assets costing less than $300 may be claimed in full in the year incurred, but assets costing $300 or more must be depreciated over their effective lives. Note, only the self-education portion of the asset can be claimed - any private use of the asset is unable to be included in the depreciation claim. Note also, depreciation may only be claimed based on the number of days during the year that the asset has been owned;

4.Cars and transport costs – the following costs are fully tax deductible:

                                     Travel from home to study and return home; and

                                     Travel from work to study and back to work.

          In the following example, only the first leg of the trip is included in your self-education costs:

                                    Travel from home to study to work (first leg);

                                    Travel from work to study and then to home (second leg)

                                   – the second leg of this trip is unable to be claimed, as it is perceived to be private.

  Costs may be claimed based on 12 week log book records and actual expenses incurred, but are most frequently claimed based on the ‘cents per kilometre’ rate (this claim is limited to 5000 klms).

  Train, bus and other transport costs may also be included in your claim. Parking costs associated with the course of study, where they relate to deductible self-education, may also be claimed;

6.Accommodation and meal costs may only be claimed where you are required to stay away from home for one or more nights, as costs incurred for shorter periods are considered private expenses. Note, where you are travelling for both private and study purposes, only the costs that directly relate to the study may be included in your self-education claim;

7.Interest on loans to cover study costs may also be included in your claim.

As you can see from the above, record keeping in relation to the costs incurred and the connection between the course of study and your current employment activities will be essential for a successful self-education claim.

Michelle Wilson

18 July 2023