Self Education Deductions - You lose the first $250
Add up your self-education expenses then subtract $250
The Commissioner is a bit per nickety about travel expenses
Do the first $250 worth of expenses all have to be deductible under sec 8-1
No! You can NOT claim a deduction for HECS, Student Assistance or Open Learning
Add up your self-education expenses then subtract $250
Section 82A of the 1936 Assessment Act imposes a reduction on the amount you can claim for self-education.
to the taxpayer under section 51 in respect of a year of income
in respect of expenses of self-education,
the deduction, or the aggregate of the deductions, so allowable to the taxpayer in respect of those expenses
shall not be greater than the amount by which the net amount of expenses of self-education exceeds $250
.In other words, the when you claim a deduction for self-education tally up all the amounts that you can claim for education expense. Education Expenses is defined as...
An expense that you necessarily incur for a course of self education
(a) Provided by a school, college, university or other place of education
(b) That you undertake for the purpose of gaining qualifications for use in carrying on a profession, business or trade or for use in the course of any employment
So you would add up such expenses as…
Course fees
Text books
Stationery
Student association fees
Car expenses (relating to self-education)
Travel expenses (relating to self-education)
Depreciation
Then subtract from the total expenses:
$250 (sec 26-25(5) requires you to do this)
Each amount that you became entitled to receive under a Commonwealth Scheme that provides assistance for secondary, technical or tertiary education or post-graduate study (sec 26-25(6) )
When deducting these Commonwealth payments you can disregard...
(a) Payments that have or will be included in your assessable income
(b) Allowances for maintenance or accommodation (living allowances)
You must also subtract any payments you were entitled to receive for education expenses deductible in earlier years
Got all that? Add up all your expenses then deduct
$250
Commonwealth assistance payments OTHER THAN living allowance
any other 'scholarship' type payments
Answer this question….
What deduction would be allowed under sec 8-1 for the following degree course in accounting for cadet accountant in private firm.
Student union fees = 250,
Transport = 100,
Books = 50.
These total $400, but you must deduct the first $250.
So only $150 can be claimed.
The Commissioner is a bit per nickety
about travel expenses
If you are using the
cents per kilometre basis for calculating your 'cost of travel' to and from the educational institution you attend, you will have to come to terms with the way the Commissioner looks at the matter. He considers the cost of travel between home and the place of education and
back home again
for self education purposes is deductible.
The cost of travel between
work and the
place of education and
back to work again
is deductible.
If you travel from
home to the
place of education and
then on to work,
only the first leg of the trip is deductible.
If you travel from
work to the
place of education and then
home,
only the first leg of the trip is deductible
(paragraph 217 Taxation Determination TD 93/145 ).
Do the first $250 worth of expenses
all have to be deductible under sec 8-1
The rewrite of this section very nearly made it into the first Tax Law Improvement Bill but was stopped by a change of heart on the part of the Commissioner of Taxation as to the meaning of expenses of self-education. "Expenses of self-education" is defined in the 1936 Assessment Act as
Expenses necessarily incurred by the taxpayer for or in connection with a prescribed course of education… (the definition also lists some amounts which are excluded but we will ignore those for the moment)
The rewritten section was intended to make it clear that the expenses which could be excluded in the first $250 of the deduction would have to be deductible under section 8 as expenses incurred in gaining assessable income.
But about the expenses, which would not be deductible under, section 8?
The Commissioner had a change of heart! In Draft Ruling 97/D20 and various press releases, it has been stated that the definition of education expenses is wider than that applied to expenses incurred in gaining or producing assessable income. To quote from the ruling…
The calculation requires that the $250 reduction applies to all 'expenses of self-education' as defined in section 82A, (1936 Assessment Act) whether or not those expenses are deductible under section 8.
Compulsory and unavoidable expenses, as well as those, for which a need can be shown, are regarded as 'necessarily incurred'.
Child care costs:
Capital cost of computers: Where there is a need to own and use a computer to fulfil the requirements of a prescribed course of education and the computer is acquired and used for this purpose, the capital cost of the computer is regarded as an expense 'necessarily incurred'.
Capital cost of filing cabinets, desks and books comprising part of a professional library: Where there is a need for such items to fulfil the requirements of a prescribed course of education and the item is acquired and used for this purpose, the cost is an expense 'necessarily incurred'.
Repairs: The cost of repairs to items of equipment used in fulfilling the requirements of a prescribed course of education is 'necessarily incurred'.
But not meals
: The cost of meals purchased while travelling to and from or attending an educational institution does not qualify as 'necessarily incurred' in terms of section 82A; rather the expenditure relates to a private matter not connected with the course of education.So the Tax Law Improvement Project rewrite of this section was shelved until the dust had settled on this new interpretation of what can and can not be included in the first $250 which is excluded from the deduction.
No! You can NOT claim a deduction for HECS, Student Assistance and Open Learning
Subsection 82A(2) expressly excludes
HECS payments,
Open Learning charges and
debt repayments under the Tertiary Student Financial Supplement Scheme
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