Consultation on self-education deduction expansion

February 2021

An announcement in October's Federal Budget indicated that FBT may be removed from fringe benefits relating to retraining or reskilling employees. Treasury has released a consultation paper outlining possible amendments to how self-education costs may be deducted.

Currently, self-education expenses are normally deductible where the education course enables the taxpayer to maintain or improve their skill or knowledge or is likely to increase the income derived from their current income-earning activities. However, self-education expenses are not deductible if the taxpayer is undertaking the course in order to obtain new employment or open up a new income earning activity. The Treasury paper looks at the possibility of allowing deductions for expenses that do not relate to a taxpayer's current income earning activities.

The consultation paper discusses whether a new specific deduction should be introduced which would allow for deductions outside these limits, specifically, to allow for deductions in relation to education and training aimed at future employment.

Some of the key points raised relate to potential abuse of the change, which could be overcome by limiting the deduction to nationally recognised training and industry training packages delivered by registered education and training providers. There could also be an exclusion for courses where it is not clear they would lead to an improvement in income earning activities (for example, lifestyle or personal development courses).

For the time being, we recommend that you speak to your accountant about the implications of these changes, as they are not yet in force. Please contact us on 02 9957 4033 for more information.

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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