Professional Development & Self Education Expenses

You guessed it - I was the kid at the front of the class with her hand in the air, way too keen to answer the teacher’s questions. I would draft essays in advance. I loved homework. Obviously this isn’t everyone’s experience of school, but one thing I hope you’ve learned to love along the way - is learning itself. 

Whether it be learning to play the guitar, perfecting that chocolate cake recipe, or acing that Excel Skills Udemy course (yes, we accountants can be totally nerdy at times!), learning something new is exciting. Some things we learn just because they interest us, but other stuff we learn so we can keep offering our clients (or employers) the best value we can. 

Did you know there’s a  tax deduction available for professional development (or Self Education) expenses? However, as with all deductions, the ATO has some criteria that you need to meet. Classic. 

What is considered professional development?

Professional Development, or Self Education, is learning or maintaining skills that are in relation to your current employment/profession. From here on out, we will just use the term Self-Education, as this is what the ATO calls their deduction. 

How can I claim a self-education deduction?

To be able to claim a self-education expense deduction, the following criteria must be met:

  • The expense must maintain or improve your skills and knowledge for your current employment, or;
  • The expense will or is likely to increase your income from your current employment.

Self-education expenses are not deductible if they:

  • Have no connection to your current employment
  • Only generally relatable to your current profession
  • Will enable you to gain/change employment

The most important takeaway from this is that you cannot claim a deduction for expenses that are not related to your current employment or work. For example, if you are employed as a photographer and you take singing lessons, that expense is personal in nature and not deductible. However, if you are a photographer, and you take a course in Photoshop - that expense would be deductible as it would lead to you being able to offer more services to your clients and, in turn, increase your income.  

Is there a limit on how much I can claim as a self-education expense?

While there is a limit on what you can claim as a self education deduction, there is no limit on how much you can claim. As always, talk to your accountant if you have any questions about what you can claim as self education.

Examples of deductible expenses

Some of the common expenses that we see claimed as self education are:

  • Seminars and conferences 
  • Textbooks relating to a deductible course
  • Equipment
  • Course costs, if you have not used a loan such as a HELP or SFSS loan
  • Travel expenses (if a lecture or course is interstate)* 
  • Stationery
  • Trade and professional journals

*Don’t think you can claim a week’s trip to Sydney for a one day lecture, though!

Sometimes it’s hard to apply the tax law to your personal circumstances, so we have outlined some of the situations you might face. If you get stuck, chat to us and we can provide guidance.

Is my Netflix subscription deductible if I watch documentaries relevant to my work?

Unfortunately Netflix is too general to be claimed as a self-education deduction.

I’m a musician who plays guitar, but I want to take singing lessons so I can record my own music.

You can claim the cost of your singing lessons as it is related to your current work and is likely to result in an increase in income.

I’m a hairdresser, but I really want to become a makeup artist as well - can I claim my TAFE tuition costs?

As the makeup course is not adding skills and knowledge to your current profession as a hairdresser, you cannot claim your TAFE costs.

I’m currently unemployed, but looking for a barista job. Can I claim my barista course?

As you are not currently employed as a barista, you cannot claim that course. Self education expenses need to be in relation to your current employment.

I’m an exotic dancer. I take classes to maintain and expand my dance skills. Can I claim these classes?

As these classes are directly linked with your current employment, and it will maintain and expand the skills needed to perform your current duties, it is deductible as self-education. 

I’m a writer and I subscribe to multiple paid newsletters and journals - is this a deduction for me?

If the main purpose of the subscription is to maintain and improve your current skills, then you may claim a deduction for these expenses. If you have subscribed for personal reasons (ie. a newspaper online subscription to keep up on world issues) you are not entitled to a deduction.

I’m an actor and I want to claim the cost of my theatre tickets as a deduction.

You can only claim your theatre tickets if there is a direct correlation between the show you are seeing and the role you are playing. For example, if you are playing a character in a Shakespeare play and you go to see Mama Mia!, there is not enough correlation there. However, if you were to see another Shakespeare play to learn, take notes and improve your Shakespearian acting, then there’s a direct correlation and you can claim your theatre tickets.

I’m a dancer and I take yoga classes. Can I claim them?

Unfortunately yoga classes are too general in nature and are not specifically required to maintain the skills of a dancer, so are therefore not deductible. 

 

As always, it’s important to chat to your accountant. If you’re about to embark on a TAFE course or purchase a subscription that you think is deductible as a self education expense but you’re not 100% sure, let us know! We’re always happy to hear from you and will happily answer any questions that you have.  

 

Commonly Asked Questions

What records do I need to keep?

Keep all receipts for everything! Your bank statement is a good backup, but I want to see receipts with the details of what you purchased and any GST included (if you are registered for GST this is important). 

There is nothing worse than missing out on deductions that you’re eligible for - no one likes paying more tax than you need too! If you’re not sure- something is deductible, add it to your spreadsheet and ask your accountant later.

Can I still spend the money if it’s not deductible?

Absolutely! Variety is the spice of life and whilst we looooove tax deductions, you shouldn’t run your business, or life for that matter, by what is or isn’t deductible.

What year do I claim my deduction in?

This situation is what accountants call “cash or accruals”.  

For individuals, tax deductions are claimable in the financial year that the money is spent. For example, if you receive an invoice for a dance class on the 29th of June 2020, but don’t make the payment until 7th July 2020, the deduction will be claimable in the 2021 financial year.  This is classified as the ‘cash’ basis.

For businesses (sole traders, Partnerships, Companies, and Trusts) who use the accruals basis for their accounting, your deductions are claimable in the financial year you ‘incur’ the expense - i.e. if you purchase a writing course on the 1st of May 2020, but the payment is not due until 1st August 2020, you can claim the deduction in the 2020 financial year. 

If your business runs on the cash basis, you will follow the same logic as individuals - the money must have been spent in the financial year you want to claim it in - this is why so many businesses do EOFY sales!

 

xxx Lauren

(and co-author Caitie Copley)

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