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Don’t Miss Out on Your Self-Education Tax Deduction This Year

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Overtime and going home late is now a work health and safety issue

UPDATE: The 2015 guide for Claiming your Self-Education Tax Deduction has been posted. Click here to view it.

 

If you want to reduce your yearly tax bill, taking up training courses is one of the best things you can do. Not only can you enhance your career by learning how to take on additional roles and responsibilities, you can decrease the amount of tax you pay!

This is a great incentive to study relevant courses and advance your career. Think of it as the government’s way of encouraging you to invest in your professional development.

Unfortunately, many Australians are unaware of this benefit and that can have a big impact in the advancement of your career. Take advantage of this tax incentive this year and see how you can improve your skills and employability.

Self-Education Tax Deductions


Every financial year is an opportunity to claim a tax deduction for your self-education expenses while you advance your career through education and training. In case you’re new to Australia, the tax year runs from July to June the following year (for example July 2013 to June 2014). Tax season starts in July and in most cases you need to lodge your tax return by the end of October.

June is one of the most popular times to start studying. Why?

Because you can start an eligible course in June and then claim course fees and other expenses as self-education tax deductions almost immediately. It means you are out-of-pocket for the shortest period of time (or can reduce your tax bill) while still getting the training and education you need for your career.

Self-education tax deductions are an amazing incentive to develop the skills you need to take the next important step in your career. You can claim deductions for courses you study at a Registered Training Organisation like Inspire Education, or at TAFE, university, college or other training provider (deductions may not apply to Government funded courses, eg VET-FEE HELP or HECS-HELP funded courses).

Three things you should know:

1. You must pay for the course yourself (you can’t claim if work pays for all the expenses).
2. The course must be directly related to your current role or result in increased income in your current role.
3. You can claim many expenses related to your education, not just course fees.

Quick navigation links:

1. Can you claim a deduction for self education expenses?
2. What can you claim?
3. How much will you get back?
4. What should you study?
5. Conditions for claiming deductions
6. Guides
7. Tools
8. Videos

Can you claim a tax deduction for self-education expenses?

The Australian Tax Office (ATO) requires your course to be “directly related” to your current employment to claim a deduction. They are quite strict about the definition. In their own words, a course must: “maintain or improve the specific skills or knowledge you require in your current employment, OR result in, or is likely to result in, an increase in your income from your current employment.”

Say you’re working as a bookkeeper. Here are a couple of scenarios:

1. You decide to formalise and develop your skills by studying the Certificate IV in Bookkeeping. The course is directly related to your current role and will help you better perform your job. Once you get the Certificate IV, you’ll be able to apply for BAS Registration which will most likely increase your income (pay rise for an employee bookkeeper, more work opportunities & higher rates for a self-employed bookkeeper). It is fair to say your education expenses should be judged eligible for a tax deduction.

2. You decide you need a change of pace and you love working with children, so you decide to become a child care worker. You study the Certificate III in Early Childhood Education and Care so you can pursue a range of regulated child care jobs. Unfortunately, the course is not directly related to your current work as a bookkeeper and will do nothing to increase your income in your current role. You won’t be able claim your self-education expenses in this situation.

Those are fairly simple, clear cut cases. In reality, it may be much trickier for you to work out.

You work as a bookkeeper BUT you do a fair bit of training as part of your job – you train clients and other bookkeepers in your workplace. You want to get the Cert IV in Training and Assessment to develop your training skills, formalise your training experience and open up some new career opportunities. Can you claim your course fees study expenses as deductions?

It will depend on how relevant the course is to your current role. Will better training skills improve your ability to perform your job? Will it increase your income in your current role? It is best to consult with a registered tax professional that can examine your situation and make a proper assessment of your eligibility.

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What can you claim?

There are a huge range of expenses – other than course fees – you can claim as self-education tax deductions. Here are some common deductions students could claim, depending on how they choose to study.

You may claim tex deductions from studying online, through workshops, or in blended methods.Studying online

Apart from the course fee itself, you can claim things like computer consumables, some equipment purchases, equipment repairs, internet usage, postage, stationery, phone calls, textbooks and home office running costs.

Studying in a face-to-face workshop

Apart from the course fee itself, you can claim travel to-and-from the workshop, stationery, parking fees (for work related claims), computer consumables, equipment purchases and repairs, and even accommodation and meals if you are away from home overnight for your course!

Studying a blended workshop & online course

You will be able to claim any of the eligible expenses incurred during both the online and workshop components of your course.

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How much will you get back?

Your tax return depends on how much you earn, the tax rate you pay, and how much you spend on training. Deductions reduce your taxable income. That means you do not pay tax on expenses you claim as a deduction.

Simply put:  Income – Deductions = Taxable Income

Example:

Jennifer earns $65,000. She has paid $12,672 dollars in tax this financial year.

Jennifer studies a course that cost her $3,000 plus she has another $500 in deductible expenses – her total deduction is $3,500.

Her new taxable income is $65,000 – $3,500 = $61,500. Her tax obligation is reduced to $11,534.50. She will get $12,672 – $11,534.5 = $1,137.50 back in her tax return.

Another way to calculate Jennifer’s return is to take the deductible amount – $3,500 – and multiply it by her maximum tax rate. Jennifer pays 32.5 cents per dollar on any income over $37,000 – that’s her maximum tax rate. Therefore she will get $3,500 x $0.325 = $1,137.50 back from tax.

Note: In this example, Jennifer has already paid her tax obligation to the government so she will receive a tax return. If she still owed tax to the government, then the deduction would reduce her tax debt.

Take a look at the ATO’s individual income tax rates page to work out your maximum tax rate.

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What should you study?

Inspire Education has a range of courses which you can study and potentially claim as self-education tax deductions (depending on your eligibility). Let’s look at a few different careers to see which courses you could do.

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The industry of Training and Assessment is constantly changingTrainer & Assessor

The vocational training industry is in a constant state of change. If you are a trainer, you will most likely need regular updates and upgrades to stay current with regulations and keep working in the industry. For example, the new TAELLN411 Address Adult Language, Literacy and Numeracy unit is expected to become a core unit of the TAE40110 Certificate IV in Training and Assessment. When that happens, all TAE40110 qualified trainers will need to complete the unit (if they haven’t already) in order to keep working in regulated training positions (eg training in a TAFE or RTO).

Courses:

TAE40110 Certificate IV in Training and Assessment
BSZ to TAE upgrade
TAA to TAE upgrade
TAELLN411 unit

You should consider training now if you are:

• A trainer working with an old BSZ or TAA certificate.
• A trainer who has not yet updated to the new TAELLN411 unit.
• A person in a professional training role (or do a lot of training as part of your normal duties) without a formal training qualification.
• Able to increase your income in your current role with additional training.

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Health & Safety Professionals

The health and safety industry was shaken up just a few years ago by the introduction of the new Model WHS Act. Health and safety courses have been updated to reflect the new legislation introduced in most jurisdictions. Many professionals are choosing to update to the latest certifications. Those working without qualifications commonly choose to formalise their skills during their career.

Courses:

Certificate IV in Work Health and Safety
Diploma of Work Health and Safety

You should consider enrolling now if you are:

• Working with an older Certificate or Diploma in Occupational Health and Safety and want to stay up to date with the latest training. (eg update to new Diploma of WHS)
• Working in health and safety without a formal qualification.
• A person who has a lot of health and safety responsibilities as part of your normal duties and can demonstrate the training is sufficiently related to your role.
• Able to increase your income in your current role with additional training.

There may also be opportunities to cross-train with courses like the Certificate IV in Training and Assessment as health and safety roles often include a strong training component.

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Child educators need a Cert III or Diploma in Early Childhood Education and CareEarly Childhood Educators

If you are working in the child care industry, you are no doubt aware of the mandatory training requirements. Many child care jobs now require formal qualifications. For instance, you need a Certificate III to work in long day care or become a family day care operator. Diploma training is required to work as a centre manager or family day care coordinator. At least half of early childhood educators working in a long day care centre also need to be Diploma qualified.

Courses:

Certificate III in Early Childhood Education and Care
Diploma of Early Childhood Education and Care

You should consider enrolling now if you are:

• Working in child care without any formal qualification and would like to be able to work in roles with mandatory training requirements (eg Long Day Care or Family Day Care).
• Working with a Certificate III and want to access the extra career opportunities possible with a Diploma qualification (eg Group Leader, Director, or Family Day Care Coordinator).
• Working with an old Certificate III or Diploma of Children’s Services and would like to upgrade to the latest qualification.
• Able to increase your income in your current role with additional training.

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Aged Care & Disability Care Workers

Courses:

• Certificate III in Aged Care
• Certificate III in Home and Community Care
• Certificate III in Disability Care

You should consider enrolling now if you are:

• Working in aged care or disability care without any formal qualifications.
• Formally qualified to work in care but could better perform your job with more training (eg upgrading to a higher level certificate or diploma).
• Able to show that extra training is relevant to your current role (eg as a qualified aged care worker, you may be able to claim a Certificate III in Disability if you work with elderly disabled patients as a normal part of your job).
• Able to increase your income in your current role with additional training.

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A Cert IV in Bookkeeping and Cert IV in Accounting are useful to pursue a career as a BAS agent, bookkeeper, or accountantAccountants & Bookkeepers

New regulations introduced in the Tax Agent Services Act 2009 have created great incentives for bookkeepers to get formal training. Qualifiying and registering as a BAS Agent or Tax Agent is a major step in many bookkeeping careers. For a self-employed bookkeeper, it means many more opportunities for work. For an employee bookkeeper, it can result in raises and promotions as you can provide more valuable services.

Courses:

Certificate IV in Accounting
Certificate IV in Bookkeeping
Diploma of Accounting

You should consider enrolling now if you are:

• Working in bookkeeping/accounting without any formal qualifications.
• Working in bookkeeping/accounting and need additional skills for your job (eg. you need a Certificate IV in Bookkeeping to become a BAS agent).
• Able to increase your income in your current role with additional training.

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Other training opportunities

We also have a wide range of courses in Project Management, Teaching English to Speakers of Other Languages, Business Management, Human Resources and Business Administration.

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*** Important: Please take the time to research and understand all the terms and conditions for claiming self-education tax deductions. We also strongly advise you consult a registered tax professional to examine your specific circumstances and determine exactly what and how much you can claim. Over-claiming or claiming deductions you are not entitled to is a serious offense. The Australian Tax Office can penalise you financially if you pay less tax than you should. Penalties may be worse if it is decided your action was intentional. ***

Now let’s look at the exact eligibility requirements for self-education deductions:

Conditions for Claiming Deductions

You can’t study just any course and claim it as a tax deduction. According to the ATO, to claim deductions, your course must:

• Maintain or improve the specific skills or knowledge you require in your current employment, or
• Result in, or is likely to result in, an increase in your income from your current employment.

Unfortunately, that means if your course is not connected to your current employment you cannot claim self-education deductions. Even if you are studying a course in able to find work or get a different job, you cannot claim this deduction unless it meets the criteria above.

More information: ATO – Eligible Courses

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Tax deductible expenses

You can claim more than just the cost of the course. Expenses you can claim include:

• Accommodation and meals (if away from home overnight)
• Computer consumables
• Course fees
• Decline in value for depreciating assets (if cost exceeds $300)
Expenses for studying a course like fees, equipment, and phone calls may used for tax deductionsEquipment repairs
• Fares
• Home office running costs
• Interest
• Internet usage (excluding connection fees)
• Parking fees (only for work-related claims)
• Phone calls
• Postage
• Purchase of equipment or technical instruments that cost less than $300
• Stationery
• Student services and amenities fees
• Student union fees
• Textbooks
• Trade, professional, or academic journals
• Travel to-and-from place of education

There are some limitations. If an item or service is used partly for your self-education and partly for other purposes, you can only claim the proportion you use for self-education. For example, if you use your internet connection for study and recreation (social media, watching videos, email, browsing the ‘net, etc) then you can only claim the proportion of the time you use it for study. In some situations, you may also be unable to claim journeys.

More information: ATO – Expenses you can claim

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Non tax deductible expenses

It is not possible to claim certain expenses:

– Repayments on Higher Education Loan Program (HELP) loans (eg HECS-HELP, VET FEE-HELP)
– Repayments on Student Financial Supplement Scheme (SFSS)
– Meals when you’re at home
– Occupancy expenses for a home office (eg interest on your mortgage or rent you pay)

More information: ATO – Expenses you can’t claim

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The “$250 reduction”

In some cases, the ATO requires that the first $250 of self-education expenses are non-deductible if you are only claiming stationery, textbooks, travel and fees.

More information: ATO – $250 reduction

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Keeping evidence for your claim

Remember, if you are claiming over $300 in total deductions on your tax return (including all deductions and expenses) you need to keep written evidence to prove your claims. Keep your diaries and logbooks up to date and hang on to those receipts!

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Proposed $2000 Self-Education Tax Deduction Cap Scrapped

You may have heard about a proposed $2000 cap on self-education deductions that was going to be introduced in 2014 and then delayed until July 1st 2015. You’ll probably be happy to hear as of November 6th 2013 it has been officially scrapped (read the official announcement here). This means you can continue to claim eligible expenses to any value.

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Guides

The ATO releases guides to many tax related issues.

•  ATO Guide to self-education expenses

•  ATO Guide to depreciating assets

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Tools

The ATO has a number of tools you can use to help determine your eligibility and calculate your claim.

•  Self-education eligibility tool

Helps you work out if you are eligible to claim tax deductions for expenses related to your study.

•  Self-education expenses calculator

This tool will give you an estimate of your possible deduction claim on your tax return.

•  Decline in value calculator

This calculator will help you calculate decline in value on assets, including the “disposal” value (value at the end of an asset’s useful life). You can use two different methods of calculation – straight line (equal deductions each year for the life of the equipment) and diminishing value (largest tax deduction in the first year and smaller deductions each year after that).

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Videos

This video nicely sums up the main points self-education deductions in less than 2 minutes. Note – it was published in 2012 and the ATO may have made changes to self-education deductions since then.

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William Cowie

William Cowie

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Comments

There’s 2 comments (add a comment)

  • Catherine Scott says:

    Thankyou for explaining things so well, I found the information to be very useful and encouraging. As a baby boomer (not rich) I have had to return to study more then twice maintaining an income at the same time, which is not easy, in order to be a desired/required childcare educator. (it took me a while not to take this personally) and I couldn’t pursue full time work for a couple of reasons.Wasn’t able to get government assistance as I had a Dip in hospitality) previously.
    As an already experienced educator in early childhood studies( years) I needed to do grandfathering just to keep my job ( this had limited conditions) , then I trained in Cert 1V, tailored towards Out of School/Vacation Care that still wasn’t enough,( in those early stages of the game with new regulations Cert 111 was not accepted as an minimum requirement in that area) As a casual my hours decreased,as they took on more casual staff, (mainly trainee teachers) so I went back and did a cert 111 so I was able work in other areas of the industry,. and now after over 17 years of experience I still need to upgrade to a Diploma to remain competitive in the casual field as the industry’s changing needs, require more people who can run rooms (in the case of creche) or fulfill qualified ratio requirement, you see, services have a rough selection criteria involving staff they choose, to fulfill their rosters).(It really helps to be a bloke in this industry top priority).. So I was just about to give up as I was not prepared to invest anymore time or money in this industry because I couldn’t .Hence your website really helped and came as a breather.
    So. Thanks again Cathy

  • Ainslie Williams says:

    Dont be fooled! i just got told by the ATO that if you already started your job in childcare and THEN go on to do your Bachelor but still currently working at the same centre you CAN NOT claim uni fees because you had the job before starting the Bachelor ( i pay my uni fees up front)

    childcare room leader and Bachelor in Early childhood education they go hand in hand! bit rough because im trying to further my education for myself and my centre!

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