Before you look at what self-education expenses include, you first need to consider if you are actually eligible to claim them.
Eligibility to claim:
There are a number of questions that need to be answered when looking at the eligibility to claim self-education:
First of all, does your course have a direct connection to your current employment activities?
Does your course maintain or improve the specific skills or knowledge required in your current employment activities?
Will doing the course be likely to result in an increase in your income from your current employment activities?
For example, Jane is completing her Bachelor of Nursing to become a registered nurse. While she is completing the course, she works in an aged care home as a carer, giving personal care to the residents and assisting with daily living activities. She reports to a registered nurse about the patients. Jane isn’t eligible to claim a deduction for her self-education expenses even though it will likely result in an increase in income, and has a connection to her current employment, as it is not relevant to her current duties and does not maintain or improve the skills and knowledge required in her current employment activities.
On the other hand, Thomas is also completing his Bachelor of Nursing on a part time basis, and has completed the modules required to be able to work as an enrolled nurse. He works as an enrolled nurse in the same aged care home as Jane, however, since he’s working as an enrolled nurse and hopes to work as a registered nurse once he finishes his degree, he can claim a deduction for his self-education expenses. His course has a direct connection to his current employment activities, and maintains and improves the skills and knowledge required in his current employment activities. It is also expected that doing the course will be likely to result in an increase in his income from his current employment activities.
However, if Thomas was working on a casual basis and studying full time, he would have to consider if he is able to claim his self-education expenses as it is possible that he would be working to support his study and not necessarily studying to increase his skills, knowledge or income from his work activities.
You can’t claim a deduction for self-education if it doesn’t have a sufficient connection to your current work activities, or only relates in a general way to your employment, or if it enables you to get new employment or change employment.
Categories of expenses you can claim:
If you have established that you are eligible to claim self-education expenses, there are a number of expenses that can be claimed, which fall under five categories.
1. Category A: Other:
Expenses that fall under Other can include tuition fees, textbooks, stationery, union fees, student services and amenities fees, public transport fares, car expenses worked out using the logbook method (not including decline in value) and running expenses for a room set aside specifically for study.
2. Category B: Decline in Value:
Depreciation deductions such as a computer, desk, or car (if you are claiming a deduction in Category A under the logbook method). The depreciated items are assets that cost more than $300 each.
3. Category C: Repair Expenses: Repair costs to assets used for self-education purposes, although this doesn’t include car repairs expenses as they would be included in either Category A or Category D.
4. Category D: Car Expenses: Car expenses using the cents per kilometre method. You can’t use this method if you have used the logbook method in Category A.
5. Category E: Non-deductible Expenses
Expenses you have incurred but can’t use as a deduction, for example, if you travel from your home, to your place or education and then to your workplace, you cannot claim the travel from your place of education to the workplace, but you can include it as a Category E expense.
Expenses you can claim:
Below is a list of expenses you can claim:
Tuition fees, including fees payable under FEE-HELP, VET Student Loan (this doesn’t include expenses paid under HECS-HELP)
Self-education expenses paid for with your OS-HELP loan
Textbooks
Stationery
Photocopying
Computer expenses – this includes interest on money you borrow to finance the cost of a computer, the cost of repairing the computer and the depreciation on the cost of the computer.
Student union fees
Student services and amenities fees
Accommodation and meals (only when the course requires you to travel and be away from home for one or more nights)
Additional running expenses if you have a room set aside for self-education purposes, for example, the cost of heating or cooling, and lighting the room while you are studying in it.
Allowable travel expenses – this is the cost of travel from your home to the place of education and back, or from work to your place of education and back.
Interest on loans when the funds are used to pay for deductible self-education expenses
Depreciation on assets that cost more than $300
Expenses you can’t claim:
There are a few expenses that you can’t claim a deduction for, including repayment for your debts (e.g. your HECS-HELP repayments). You can also never claim the cost of accommodation and meals associated with your day-to-day living expenses, or tuition fees that are paid under HECS-HELP. However, the cost of accommodation and meals associated with day-to-day living expenses can be declared as a Category E expense, which means it will reduce the $250 reduction (see below for more information), for example, if you buy yourself a coffee for $5 while at university, you can declare this as a Category E expense, and the $250 reduction will be reduced to $245.
The $250 reduction:
In most circumstances, you will have to reduce your allowable self-education expenses by $250, which is calculated automatically in your tax return. If all your expenses are Category A items, your total deduction will be reduced by $250. Other expenses that do not fall under Category A can be offset against the $250 before you have to reduce the amount you can claim. Therefore, the formula for calculating your claim for work-related self-education expenses is:
Total Claim Estimate = A – [$250 – (C + D + E expenses)] + B + C + D
If the total of (C + D + E) expenses is greater than $250, it is reduced to 0, not to a negative amount.
When the Federal Budget was announced, they also announced that the $250 reduction would be removed, however, it won’t be removed until the year after it receives Royal Assent.
Still confused?
Contact us to book an appointment and we will help you find out if you can claim!