In a post-COVID recovery, deductibility for re-training could be a much needed kickalong

Late last year, Treasury released a discussion paper around the announcement in the 2020-21 Federal Budget to allow individuals to claim deductions for education and training expenses they incur where the expenditure is not related to their current employment.

This is on top to the FBT exemption already announced for employment-provided retraining and reskilling for redundant, or soon to be redundant, employees where the benefits are not related to their current employment.

With the 2021 FBT return deadline looming (21 May), considerations in the re-training claims area will naturally be focused on the 2022 FBT year, with Treasury’s paper and subsequent consultation figuring largely on the targeted planning required should certain outcomes be put in place. Familiarity therefore with the issues covered may be advisable should you have a potential cohort of clients that may want to take advantage of developments.

The discussion paper canvasses a number of issues, including:

  • Whether tax deductions for individuals are appropriate, given the very significant government support for education and training that already exists.
  • Whether deductions should be targeted to registered providers that are subject to appropriate regulation.
  • Whether “lifestyle and personal development courses” should be excluded.
  • Whether support should be targeted at areas of expected jobs growth (picking winners).
  • Should deductions be limited to tuition fees?
  • How should tax deductions interact with government funding and subsidies (if at all)?
  • Should the existing $250 exclusion be removed?
  • How to minimise opportunities for abuse?

Treasury says the discussion paper seeks stakeholder views on whether tax arrangements should play a greater role in encouraging Australians to retrain and reskill to support their future employment and career and, if so, how this would best be achieved.

The potential changes outlined in this paper have not received Federal Government approval and are not yet law. As a consequence, the paper is merely a guide as to how any potential changes might operate.

The paper makes note that no further consultation is expected before we see any law change, although with a major expansion in the deductibility of self-education expenses in the offing it is likely this will have implications for many taxpayers.


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