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Treasurer Wayne Swan has announced that the Federal government intends to limit the deduction that an individual can claim for work related self-education expenses to $2,000 a year. The changes will be in effect as of 1 July 2014.

The cap is an effort to stop large claims for private benefits.

In his announcement, Swan said the current system enabled people to “enjoy significant private benefits at taxpayers’ expense”. These expenses include “first class airfares, five star accommodation and expensive courses.”

The government believes that the reform will save an estimated $520 million a year.

How Does this Affect You?

The proposed $2,000 cap will have no effect on individuals making claims for work related self-education expenses in the 2013 income tax year. It will also not affect the rules for determining whether a work-related self-education expense can be deductible.

Broadly, the rules for the deductibility of work related self-education expenses are as follows:

  • Currently, an individual may claim any amount (i.e. not limited to a $2,000 cap) of work related self-education expenses incurred to maintain or improve his/her skill or knowledge necessary to perform his/her current income-earning activities. An example of such a deductible expense would be an accountant attending an accounting seminar, conference or workshop to stay up to date with the latest accounting developments.
  • However, an individual may not claim such self-education expenses for studies that enable him/her to obtain new employment or to open up a new income-earning opportunity. An example of such a non-deductible expense would be an engineer enrolling in a MBA course because he/she is looking to move from engineering to management consultancy.

Next Steps

Although this proposed cap will have no effect for you in the 2013 income tax year, we would recommend that you talk to your Pilot representative to ensure that you are not missing out on some of the deductions that are available for work related self-education expenses such as tuition fees, textbooks, stationery, travel expenses, conferences, seminars and self-organised study tours.

Should you wish to know more, please contact Murray Howlett of our Taxation Services Division on (07) 3023 1300.