So now that the end of financial year is looming, it’s a great time to learn how you can make your course work for you, save yourself some money, get that coveted qualification under your belt and be on your way to a brighter future!
The cost of studying to improve yourself and your ability to perform at work can almost be prohibitive at times. With house prices snowballing, fuel prices skyrocketing and investments yielding lower returns sometimes self-education can take a back seat. But the good news is that you may be able to take advantage of the self-education tax refund scheme that the Australian Government has in place for its higher education sector which could save you hundreds or even thousands of dollars on your higher education.
New Skills and Training Boost Employer Incentive
Announced in March 2022, this latest Australian Government incentive makes it easier for small businesses with an annual turnover of less than $50 million to upskill their staff. The incentive offers qualifying employers a bonus 20% tax deduction for eligible training courses such as VET qualifications and applies until 30 June 2024. This means that for every $100 your employer spends on upskilling your team with training, they will get a $120 tax deduction. The upside is you can sign up for an online course today, and your employer will receive an immediate tax benefit for any amount they contribute toward your course. This is on top of your personal self-education tax deductions outlined below.
What is the self-education tax deduction?
If you undertake study that is related to your work and it helped you in your current job, then you may be eligible to receive a tax deduction on your course fees and other expenses that aid in your study.
Who is eligible for the self-education tax deduction?
According to the ATO website, you must have met one of the following conditions when you paid for your course:
- the course maintained or improved a skill or specific knowledge required for your then current work activities
- you could show that the course was leading to, or was likely to lead to, increased income from your then current work activities, or
- other circumstances existed which established a direct connection between the course and your then current work activities.
This means you are unable to claim course fees if the study:
- relates only in a general way to your current employment or profession, or
- will enable you to get new employment.
Kim is working as a Human Resources officer and has decided to undertake the Diploma of Human Resource Management (BSB50320) to back up her work-based experience with a qualification. She is improving specific skills or knowledge used in her current employment and therefore will be able to claim the self-education tax deduction.
James is a builder’s labourer and wants to study the Certificate IV in Project Management (BSB40920). He wants to study this qualification so that he can get a new job. As the course does not relate to his current employment and will enable him to gain new employment, he is not eligible to claim the self-education tax deduction.
What can I claim?
There are many things that you can claim through the self-education tax deduction scheme so long as you meet the above requirements. Below is a brief overview of some of the things that are eligible:
- Course fees
- Decline in value for depreciating assets (where the cost exceeds $300)
- Purchase of equipment or technical instruments costing less than $300
- Equipment repairs
- Home office running costs e.g. electricity and heating
- Computer consumables e.g. software, USB sticks, hard drives
- Internet usage (excluding connection fees)
- Phone calls
- Trade, professional, or academic journals
How much could I get back?
Let’s say that Jim earns $60,000 per year. Therefore he will have to pay $11,047 in income tax. If Jim’s course is $2995 and he has an extra $500 in course-related material, he can deduct this amount from his taxable income ($3495 in total). Therefore his taxable income will be reduced to $56,505 and he will only have to pay $9911.13 in tax. Saving himself $1135.87.
From this example: $60,000 – $3,495 (course + expenses) = $56,505 (new taxable income)
Depreciation of your computer
If you qualify for the self-education tax refund, then you can also claim the decline in value for depreciating assets, such as a computer or laptop that assisted you in completing your studies.
Jack bought a laptop for $1,500 on the 1st of July 2020 and uses it 80% of the time to complete his online course and 20% of the time for personal use (he loves social media!). According to the ATO the effective life of a laptop is 3 years. Depending on which method is used i.e. the prime cost or diminishing cost deduction (both equate to the same amount of money over time, just at different rates) will depend on how much he will be eligible to claim on his tax return. Below is a table that details how much he could claim per year on his return:
|Income Year||Prime Cost Deductible Amount ($)||Diminishing Value Deductible Amount ($)
As you can see, because Jack uses his laptop 80% of the time for his study, he is eligible to claim $1,200 back over the effective life of the laptop (80% of $1,500 = $1,200). As you can see the prime cost method gives you an even amount of return per year for fewer years and the diminishing value method gives you a larger return initially but tapers off gradually. Speak to your tax accountant for their recommendations for your situation.
You can go to the ATO website here and use their free calculator tool to work out your own expenses and eligibility.
Keep in mind, if you are claiming expenses such as laptops and home office running costs you should keep a diary to work out and keep a record of how much you used your equipment for personal or study use over a representative four week period. This will help when you claim your expenses and provide evidence of how much you are using the equipment to support your study.
Updated government ‘working from home’ requirements are important to research or check with your tax accountant with regards to working from home and self-education tax deduction expenses. You can find home office expenses information here, and self-education expenses here.
What to do next
If you pay for your course before the 30th of June and you meet the criteria, you’ll be able to claim your self-education refund on this year’s tax return and could potentially have money back in your pocket in a couple of months! If you speak to one of our Learning Consultants today, we’ll be able to advise you on what course is right for you and how you can go about getting your qualification.