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Allowing taxpayers to claim deductions for education and training expenses unrelated to their current jobs will remove a disincentive within the tax system, says one professional body.
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Expanding self-education deductions a ‘no-brainer’, says IPA
06 May 2021
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The Institute of Public Accountants is urging the government to move ahead with its proposal to expand tax deductions to education and training that is not related to an individual’s current work activities.
Taxpayers can currently only claim deductions for self-education expenses if they are directly related to their work.
The proposal, contained in last year’s October federal budget, has divided the tax profession and has yet to move beyond an initial discussion paper released by the Treasury late last year.
The IPA’s chief executive, Andrew Conway, believes the government should commit to its plan in its 11 May budget.
“Our tax system inhibits rather than incentivises reskilling and retraining,” Mr Conway said. “Education expenses that do not have a sufficient connection to an individual’s current employment are currently not deductible.
“The disruption[s] caused by globalisation, technology, intergenerational forces, the changing nature of work and the labour market are driving the need for continued upgrading of skills throughout life.
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“Those who have the financial capacity to invest in themselves should be encouraged to do so, particularly in a post-pandemic environment where jobs have been displaced and overseas immigration of skilled labour has been curtailed.”
The IPA’s Tony Greco also believes expanding self-education deductions will also remove the need for the government to exempt employers from the 47 per cent fringe benefits tax (FBT) for retraining and reskilling soon-to-be-redundant employees — a budget measure that has now resulted in draft legislation.
“There will be many employers, particularly smaller entities, who do not have the financial resources to fund employee support for retraining and reskilling,” Mr Greco said.
“If the government proceeded with expanding the income tax deduction for education deductions, then the FBT exemption would not be required.
“The operation of the otherwise deductible rule would exempt the benefit from FBT and therefore the necessity to amend the FBT rules.”
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