by Doctors Wealth Accounting

Since the original government announcement regarding the proposed limitation on self-education expense claims from 1 July 2014 ($2,000 per year), several key developments and amendments have occurred that we believe is important to highlight to our clients.

Change of Dates

The original proposed start date of 1 July 2014 has been moved back to 1 July 2015. That gives us an additional 12 months to still fully utilise self-education expense s without fear of any cap.

Perceived Distinction Between Forms of Education

In a previous article, we have highlighted the difference between formal self-education costs (colleges, university, master degrees, fellowship programs, etc.) and informal self-education costs (e.g. general conferences, general seminars, etc). We had previously stated the proposed limitation should only apply to the formal self-education costs component. This no longer appears to be the case.

The proposed $2,000 cap is proposed to limit ALL forms of education, irrespective of whether they are formal or informal. This was achieved by a proposal to change the definition of what currently constitutes self-education expense. After considering that the first $250 self-education expense are not tax deductible, this effectively means the new proposal will limit self-education tax claims of up to $1,750 per year.

Note that other work related expenses such as professional membership fees, professional indemnity insurances, overtime meal expenses, travel expenses, home office expenses and protective clothing expenses will not be affected since they do not relate to education expenditure. Travel for work purposes and in between income producing activities will continue to be deductible in full but travel related to educational activity (e.g. work to an educational facility) would fall within the $2,000 cap.

In Summary

In summary, the breadth of the proposed $2,000 cap is much larger than we originally thought. Initial views where the $2,000 cap will only apply to “formal” education no longer appears to be the case but will more likely apply to both “formal” and “informal” education expense. We stress that at this stage this is still a proposal and not yet law. We will continue to monitor any further developments and will keep everyone updated.

The proposal by the government is to introduce an unindexed $2,000 cap on the total of the amounts that a taxpayer can deduct as self-education expenses for income tax from 1st July 2015. In doing so, there will be a definition of what is an education expense. Note that this “education expenses” will now cover both maintaining and updating knowledge together with upgrading of skills and qualification through formal and informal educational activities.

Should you wish to discuss this further, please do not hesitate to contact Henry or Nick at Doctors Wealth Accounting on  (07) 3252 8810