The Treasurer announced on 13 April 2013 that self education expenses tax deductions will be capped at $2,000 per annum from 1 July 2014. Please click here to read our publication on this topic.
Employer funded education expenses
Employee education expenses incurred by an employer will not be subject to the proposed cap. However, there is an anti- avoidance measure that stipulates that there must not be any salary sacrifice arrangement in connection with the education costs.
What are self education expenses?
Self education expenses can include costs of professional association seminars as well as courses at educational institutions, and are not limited to expenses incurred by an employees (see Taxation Ruling TR 98/9).
The costs of even one subject at an educational institution or attendance at just one industry conference will likely exceed the proposed cap, and there are a whole range of circumstances where employers may not be willing or able to fund the costs of employees maintaining and increasing the skills and knowledge that they use in earning their income.
The proposed measure is a very blunt tool which will operate differently depending on how the education expenses are structured – a limit of $2,000 if an employee meets the expenses directly, and perhaps no limit if an employer is involved.
What about the self-employed professional?
What happens if you are a self-employed professional faced with significant professional education obligations (such as medical practitioners, accountants and lawyers)?
On the face of it, self-employed professionals will be subject to the same $2,000 cap as employees without the ability to have these expenses (which are likely to amount to much more than $2,000 per annum for many professionals) dealt with by an employer.
While we would not expect this to be the intended outcome, Government expects to receive significant extra tax revenue from the proposed self-education expense cap and professionals and others with these expenses should take a very close look at the detail of the Government proposal, when it becomes available.