If you have been thinking about taking a course or about studying further and want to claim it back on your tax return, take a moment to read this article before going ahead.
Self-education is an area of the individual income tax return that can get many people into trouble. This is because they may incorrectly claim costs not qualifying for the deduction.
To start with, any self-education costs that you try to claim must be work-related. They must be costs incurred to receive a formal qualification from a school, college, university or another place of approved education. To claim this deduction, you must be able to show that there is a close connection between the course and your current work activities at that time.
You can claim a deduction if:
- The course maintained or improved a skill or specific knowledge required for your then-current work activities, or
- You can show that the course led to, or was likely to lead to, increased income from your then-current work activities.
You cannot claim a deduction for self-education if:
- The course relates only in a general way to your current employment or profession, or
- The course will enable you to get new employment.
Determining Close Connection To Employment: An Example
Louis is a computer science student studying system analysis, software design and programming.
Louis also works at the university laboratory installing computers. His course and job are only very generally related. The work only requires a low level of computer knowledge which Louis already had before starting his employment.
The high-level professional skills Louis acquires from the course are well beyond those currently required for his current employment.
Consequently, Louis cannot claim a deduction for his course because it:
- does not maintain or improve his specific knowledge or skills in his current job
- relates in only a general way to his current employment
- will enable him to get new employment.
It is undoubtedly crucial that you talk to us before you decide to commit to formal education to upskill if the ability to claim a tax deduction is a part of your decision-making process. We can assist in clarifying if it will be claimable and accepted by the ATO.
