What education expenses are tax deductible for 2020?

While shelling out for the taxman isn’t the most exciting thought; those of us investing in self-education are in luck. The ATO has outlined specific expenses eligible for a tax reduction, putting your bank account at ease when the new year rolls around.

“Self-education” refers to any educational courses taken at a school, college, university, or other recognised academic institution.

If you fall under that category, SkillsTalk have outlined the assets you can and can’t claim for your taxes in 2020. 

First off, are you eligible?

Before claiming your expenses, you must first check your eligibility to do so.

According to the ATO, you must be taking a course that leads to a formal qualification, and one that has an adequate connection to your current employment. Such training must also lead to improved work skills and a likelihood of increased income.

Students are also eligible if they’re upgrading their qualifications for their current work role (i.e. shifting from a Bachelor’s qualification to a Masters). Those undertaking a course as part of a traineeship also qualify for deductible tax expenses.

However, you are not eligible for deduction if your course is only vaguely connected to your current work activities. For example, those undertaking a fashion photography course while working as a part-time sales assistant will likely not qualify.

Additionally, if your current course enables you to move from your current work role to a new one, you’re likely not eligible for these tax deductions.

If you do fit the criteria of an eligible student, below are expenses you can claim from your education.

What self-education expenses are tax-deductible for 2020?

1. General course expenses.
2. Depreciating assets.
3. Travel expenses.

1. General course expenses.

Assets that fall under “general course expenses” include course and tuition fees, equipment repairs, fares, home office costs, internet usage, parking fees, stationary, textbooks, and travel costs. These are just some of the more notable ones, however; the ATO has detailed all eligible course expenses on their website for further reference.

Travel costs are a bit tricky – journeys directly linked to your place of education can be claimed, while anything otherwise likely won’t qualify. Those ineligible, however, may be used against the “$250 reduction” rule, a factor we’ve further detailed below.

Any expenses partly made for personal use, and partly for work or educational purposes must also be properly apportioned (more on this further below).

2. Depreciating assets.

Students can also claim a deduction for educational assets that lose their value over time. These include laptops, printers, calculators, and any other technical tools or instruments.

Depreciating assets that cost more than $300 are typically claimed over its lifespan (or decline in value). However, for those that cost $300 or less, you may be able to claim a deduction for its full cost.

These items must be connected to your study during the financial year, and can only be claimed for usage related to your education. As such, costs due to private means do not count.

A note on computers

As well as considered an eligible depreciating asset, some computer-related expenses are also tax-deductible. These include interest accumulated on money borrowed to finance the cost of the device, and any costs on repairs.

Though computer upgrades don’t count as “repairs”, they may still be claimed as part of its depreciation. Eligible “upgrades” are considered additions made to existing computers to enhance their usability.

3. Travel expenses.

Unless you’re lucky enough to live or work close to your training, you may be able to claim the costs of long drives or commutes to your place of education.

This, however, only applies to travel directly connected to your educational institution. Travel costs made from your home to your training and back; or from your work to your training and back, are eligible for a tax deduction.

The “last stage” of your travel from, say, your home to your training to your place of work, unfortunately doesn’t qualify for a deduction claim.

The $250 reduction

Here’s where things get a tad complex.

The ATO has broken down self-education expenses into five categories – each labelled from A to E. Category A includes plenty of the “general” course expenses previously outlined, including tuition fees, transport fees, textbooks, and stationary. Category B refers to decline in value (or depreciation) deductions, Category C covers repair costs, and Category D includes car expenses. Category E outlines all other costs that aren’t considered tax-deductible.

Should all your self-education expenses fall under Category A, your total tax deduction must be reduced by $250.

However, if you’ve got expenses that fall under their fifth category (Category E) – you may be able to use these to offset the $250 (a nice trade-off for being non-tax-deductible).

Such expenses include any childcare paid for while tending to your self-education activities, or travels

considered ineligible or a deduction claim.

Apportioning expenses

As mentioned, tax-deductible expenses can only be claimed for the percentage at which you’ve used them for work.

This means that assets such as computers, printers, or other devices used during your training must be properly apportioned between education-related usage and that of private means. If you’ve only used your laptop for training activities 50% of the time, for example, you can only claim half of its cost as a tax deduction.

Luckily, the ATO provides individuals with a self-education expenses calculator – a tool that helps you estimate the amount you can claim on your tax return.

Recording your expenses

To make things easier come tax time, it would help to document all expenses made during your self-education activities. 

The ATO recommends students keep receipts and other records that serve as evidence of such costs. These include those related to course fees, stationary, textbooks, repairs, and the depreciation of assets.

Travel expenses should also be documented through receipts or diary entries.

To help streamline your tax management for 2020, the ATO offers a myDeductions tool for recording all expenses made for your self-education pursuits.

What are some expenses you can’t claim?

The ATO holds an online list of all self-education costs that don’t qualify for deduction; including tuition fees you’ve been reimbursed for, Student Start-up Loan (SSL) repayments, Student Financial Supplement Scheme (SFSS) repayments, and “home office occupancy” expenses (i.e. rent or mortgage costs).

For all non-eligible expenses in full detail, be sure to refer to the ATO website.

Know what to claim for 2020

Educational investments can be hefty on your finances, so it helps to know what you can and can’t claim for a tax reduction.

The above sections merely summarise the ATO guidelines, so it’s best to consult your accountant for further details. The ATO’s information is also subject to change, so be sure to check their website for any current updates.

With the right planning and tax knowledge, you may just save yourself a gracious amount by the end of the financial year – hopefully, with an impressive qualification to boot.

Thinking of investing in self-education?

The benefits of self-education are plenty; from valuable self-development to helping boost your career opportunities.

From over 80 qualifications across Australia’s thriving industries, Upskilled prides in being a leading RTO of online education. Whether your interests lie in the blooming field of IT or the fulfilling roles of community services, there’s a course fit for your passions – and best of all, they’re flexibly delivered 100% online. Study where you want, when you want, at a pace that suits you best.

To advance your career or discover your ideal industry, enquire on a course today.

This article should not be taken as expert financial advice. Please consult a financial specialist for further advice on your circumstances.