Cutting self-education expenses off your taxable income is one of the best tax-saving strategies available to you.
It’s tax season, and as we all know, it can be a stressful time. But this year, taxpayers with self-education expenses have something to look forward to! Starting with the 2023 tax return, the $250 minimum threshold for claiming self-education deductions will be removed. This means that 100% of self-education expenses are deductible where they have a sufficient connection with your income-producing activities.
Under the new rules, textbooks, stationery, and professional journals will still be deductible. However, student contributions and payments to reduce Higher Education Loan Program (HELP), Financial Supplements and other higher education debts remain non-deductible, as do expenses you incur before commencing an occupation or to help you obtain a new occupation.
HOW TO BECOME ELIGIBLE?
Self-education expenses provide great opportunities to further your career and pursue self-improvement. However, it’s important to understand the eligibility criteria around self-education expenses to ensure you can claim them on your tax returns.
To qualify, self-education expenses must satisfy two requirements:
- the self-education must have an immediate and direct connection to the current employment activities of the taxpayer at the time of incurring the expense, and
- it must lead to increased knowledge or specific skills needed in their existing job, or
- it must have been undertaken with a view to increase assessable income from current work activities.
Self-education expenses can potentially provide great tax deductions, but it is essential to understand the grounds on which self-education expenses can be deemed ineligible.
How Do I Claim The Deduction?
To claim the deduction, you must complete Item D4 of your Income Tax Return or complete ‘work-related self-education expenses’ in myTax. You must also keep accurate records of all your receipts in case you are audited by the Australian Taxation Office (ATO). Remember that any deductions claimed must relate directly to earning assessable income; if there isn’t a clear connection between the expense and your income-producing activities, then you won’t be able to claim them.
What Are The Benefits?
The main benefit of removing the $250 threshold for claiming self-education expenses is that it makes it easier for people who are studying part-time or who don’t have high incomes to offset the costs associated with furthering their education. This means that more people can pursue their educational goals without worrying about whether they will get any tax relief from doing so.
Additionally, it allows taxpayers more flexibility in claiming a deduction as they no longer need to worry about meeting the minimum threshold before being able to claim a deduction.
Key points
- The government has announced that the minimum threshold for claiming self-education deductions will be removed.
- The current minimum threshold for claiming self-education deductions is $250.
- Taxpayers will no longer need to spend a minimum of $250 on self-education expenses to claim a deduction.
- Self-education expenses are those incurred in undertaking a course of study that is relevant to a taxpayer’s current work activities.
- Taxpayers should keep records of their self-education expenses to claim a deduction.
Conclusion
This year marks an important change in how taxpayers can claim deductions related to self-education expenses. Starting with the 2023 tax return, 100% of self-education expenses can now be claimed where they have a sufficient connection with your income-producing activities — no more having to meet minimum thresholds.
If you think you may qualify for self-education deduction and you’d like to learn more, our specialised team of professionals at Wardle Partners Accountants & Advisors can provide guidance and advice on how best to maximise your deduction while ensuring compliance with the relevant laws and regulations. Contact us today for more information about how self-education deductions can help reduce your tax burden this 2023.
