Tax Deductions for Education and Childcare Expenses
We’re commonly asked, “Can I claim tax deductions for educational expenses?’ and “Is childcare tax deductible?” There seems to be much confusion about the answers to these questions. As financial planners, we aim to maximise our clients' wealth, including minimising the tax they owe. So here we’ll clear the air and delve into tax deductions on educational expenses and childcare tax deductions.
Deductible education expenses
First, we’ll cover expenses that you can deduct from your income when calculating the tax you owe.
Self-education expenses related to your employment activities
When you pay for education or training related to your work, you can deduct the expenses connected with this, including:
Education and training received at educational institutions, even if it doesn’t lead to a formal qualification
Attending work-related conferences and seminars
Doing self-paced learning and study tours (in Australia or abroad)
The self-education you pursue needs to have a sufficient connection to your work. This includes maintaining and improving skills or knowledge required in your work activities or resulting, or likely resulting, in an increase in your income.
Employment activities are the tasks and duties you’re expected to perform in your role, usually defined in a position description. For example, if you are a salesperson, you can take a sales skills course or public speaking course (if you sell to groups of people) and deduct the expense. If you want to reduce work-related stress and think a yoga class will help, you can’t deduct this expense because it’s unrelated to an employment task or duty.
You can claim a self-education tax deduction when you incur the expense.
If you are looking back at previous tax years, the first $250 of annual self-education expenses was not deductible before 1 July 2022.
What can you claim as self-education expenses?
If you are eligible to claim self-education expenses, you can claim a range of direct and related expenses, including:
Course, tuition, conference or seminar fees – this includes amenities fees if enrolled at a higher education institution. If taking on a loan, such as a FEE-HELP loan – the course fees are deductible when the debt becomes a legal obligation, not when you make a repayment.
Expenses related to the course, conference or seminar – including things like computer consumables, computer repairs, stationery, student union fees, textbooks and journals.
Car and other transport expenses – you can claim transport and car expenses for the legs of trips connected to self-education. For example, you can claim the whole trip when going from your home to your place of education and back home, but only for the first leg when going from your home to your place of education and then to work. This applies to both your personal vehicle and public transport expenses. You can also claim parking fees when attending your place of education or where a course or seminar is held.
Accommodation, meal and travel expenses – when you have to travel to participate in work-related education or training that requires you to be temporarily away from home, you can deduct these expenses. If you engage in private activities during the trip (such as spending extra time and engaging in personal activities like sightseeing), you can’t deduct the full trip expense amount and will need to determine the self-education portion to claim a deduction.
Decline in value of depreciating assets – assets you use for work-related self-education can be depreciated over time until the asset value is zero. This applies to items such as computers, professional libraries, bookshelves and filing cabinets, and tools and technical instruments. You will want to discuss the finer details with a tax professional. This includes apportioning depreciation on a percentage basis if you use the asset for work-related education and personal use.
Record keeping
Taking tax deductions on educational expenses can be a great way to reduce your income when it’s time to do your tax return, but you need to be able to justify the deductions you claim. This starts with accurate record-keeping. So keep all your receipts for course fees, tuition, textbooks, equipment, travel and transport expenses.
For depreciating assets, you need to:
Keep your receipts and invoices that show the cost and date you purchased the asset
Provide details of how you determined the effective life of the depreciating asset
Show how you worked out the decline in the value of the asset
Provide details on the percentage of time you use the asset for self-education (if you also use the asset for other purposes).
If you are planning to claim education expenses as tax deductions, there are tools to help you, such as the ATO’s myDeductions tool. This free record-keeping tool in the ATO app helps you keep your expense records in one place.
While tax deductions on education expenses might seem complicated, getting professional taxation assistance will simplify the process and help you maximise your tax savings.
What’s not tax deductible?
While there are many opportunities for tax deductions on educational expenses, there are expenses you can’t claim, including:
Education expenses paid by someone else or that you are reimbursed for by your employer or other third party
Tuition fees for Commonwealth-supported places at a university or other higher education provider. This includes any fees paid with the assistance of HECS-HELP loan repayments and training and support loans, such as HELP, FEE-HELP and VET Student loans.
Meals and accommodation in situations where you are not required to be away from home temporarily. So you can’t deduct the cost of your lunch if you are studying at a university or TAFE in the city where you live.
What about childcare tax deductions?
Unfortunately, childcare payments are not tax deductible. Instead, the Australian Government offers a childcare subsidy.
Eligibility criteria for the Child Care subsidy include:
Caring for a child 13 or under who’s not attending secondary school (unless an exemption applies)
Using approved childcare services, including long day care, out-of-school hours care, family day care, and in-home care
Being responsible for paying childcare fees
Meeting residency and immunisation requirements
From 10 July 2023, the Child Care Subsidy increased, with most families using child care now getting larger subsidy amounts. From this date, the maximum amount of CCS increased from 85% to 90% for families earning up to $80,000. Families that earn over $80,000 and under $530,000 may get a subsidy starting from 90%. Depending on your income, the subsidy decreases by 1% for each $5,000 a family earns over $80,000.
Get more details on the CCS from the Services Australia website.
Get help with tax deductions to maximise your income and wealth
Keeping up with tax deductions can take time and effort. At Lanteri Partners, we offer tax and accounting services within a wealth management environment to assist you in maximising your tax deductions to grow your wealth.
Contact us to discuss your finances or how we can help you build and protect your wealth.