CDP tax deduction changes are coming?

From Craig Lyon
Craig Lyon & Associates Pty Ltd
Suite 3, 1st Floor, 136 Canterbury Road (PO Box 805)
HEATHMONT   VIC   3135
Ph: (03) 9729 7592

Contained in last week’s budget papers was confirmation that the government intends to introduce a $2000 cap on tax deduction claims for work-related self education expenses. The proposed commencement date for this measure is 1 July 2014.

In the Treasurer’s 13 April 2013 announcement of this measure, Mr Swan defended the move on the basis that without a cap, “it is possible to make large claims for expenses such as first-class airfares, five-star accommodation and expensive courses”.

The announcement and subsequent confirmation in the budget papers have failed to clarify some of the issues surrounding this measure.

The media release accompanying the announcement contained a number of examples of what are considered to be “self education expenses”. These included:

  • formal qualifications and associated tuition fees, textbooks, stationery and travel expenses; and
  • conferences, seminars and self organised study tours.

The list of examples go beyond what would normally be considered “self education expenses”for the purpose of preparing a tax return. The 2012 income tax return instructions issued by the Australian Taxation Office define “self education expenses” as expenses incurred in doing a course to get a formal qualification from a school, college, university or other place of education). There is no suggestion in the examples provided that there need be any connection with the school, college or university course with. It is also likely that courses conducted by organisations that would not normally be considered to be places of education will also fall within this measure.

In future, individuals will need to be careful when making claims for other work-related expenses which, prior to the announcement of this measure, were not technically “self education expenses”.

It should also be noted that the proposed measure applies to individuals. Self education expenses paid for by employers in respect of their employees appear not to be covered by this measure (however, FBT may apply where an employee salary sacrifices such expenses).

According to the budget papers, a discussion paper will be released in late May 2013 and the government will consult with employees and employers on this matter. Much of the discussion is likely to centre on the amount of cap. The amount of $2000 would be manifestly inadequate for many employees doing the right thing and updating their technical knowledge (often as a mandatory requirement of their profession).

In focusing on travel and accommodation costs, the announcement implies that it is not necessary to travel in order to meet one’s self education requirements/obligations. However, employees in rural areas often must travel to rural centres or capital cities in order to obtain the training that they need. In cases of highly specialised training, such training may only be conducted in a handful of locations in Australia or overseas making costly travel and accommodation both necessary and unavoidable. As the proposal currently stands, there appears to be no allowance made a costs in the circumstances.

The announcement ‘s reference to “expensive courses” fails to recognise that the expense of the course generally reflects the specialised nature of the training, the duration of the course and the high qualifications of the course presenters. To attempt to argue that a training course should not be deductible to an employee by virtue of its cost completely ignores the intended benefit of attending a course in the first place.

The Treasurer’s announcement states that “The government will consult closely with employees and employers to better target this concession while still supporting essential training”. It is likely that the consultation process will be a robust one.