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Work-related self-education expenses, gifts or donations, cost of managing tax affairs

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27
Apr

Work-related self-education expenses

An individual can claim tax deduction if his or her study is work-related or receive any taxable bonded scholarship.

According to Australian Tax Office (ATO), “Self-education is defined as courses undertaken at an educational institution, attendance at work-related seminars or conferences, or self-paced learning and study tours (overseas or within Australia).”

While claiming tax deduction on work-related self-education, any one of the following conditions are required to be met:

  • The course maintained or improved a skill or specific knowledge required for individual over current work activities;
  • Individual can show that the education will help or lead him/her to increase the income than the current work activities; or
  • Some other circumstance which will establish a direct connection between the course and individual’s current work activities.

An individual cannot claim deduction on the following basis:

  • The course is related to the current employment or profession in a general way; or
  • The course will help an individual to get a new employment, new business or to facilitate in new earning activates.

Furthermore, if an individual is eligible to claim, there are many expenses of work-related self-education, which is considered as tax allowable deduction. Some allowable and non-allowable tax deductions on work-related self-education have been mentioned below:

 

Allowable tax deductions

Non-allowable tax deductions

  • Course or tuition fees
  • Books, Journals and Stationaries
  • Accommodation & Meals (if away from home overnight)
  • Decline the value of depreciated assets (if it exceeds $300)
  • Student service & Amenities fees
  • Parking fees (only work-related claims)
  • Travel to and from place of education (only for work-related claims)
  • Home office running costs
  • Phone calls
  • Postage
  • Internet usage (excluding connection fees)
  • Purchase of equipment or technical instruments costing $300 or less
  • Interest
  • Computer consumables
  • Equipment repair
  • Fares
  • Repayments of Higher Education Loan Program (HELP) loans
  • Repayments of Student Financial Supplement Scheme (SFSS)
  • Home office occupancy expenses (e.g. rent, mortgage, house insurance & council rates)
  • Meal purchased while on normal travel between home & and educational institution

Note: Some travel expenses cannot be claimed but individual can offset the cost of these expenses against $250 reduction. Also, if an expense is partly of the work-related self-education and partly for other purposes, individual can only claim the amount related to the individual’s self-education as reduction.

Gifts or Donations

An individual can claim tax deduction for gifts or donations to organisations, which have the status of Deductible Gift Recipients (DGRs).

To claim tax deduction on gifts or donations, following four conditions need to be met:

  • The gift must be made to a deductible gift recipient;
  • A gift must be truly a gift. It is a voluntary transfer of money or property where the individual or organisation does not receive any material benefit or advantage;
  • Gift must be money or property, which includes financial assets; for instance, shares;
  • The Gift must comply with any relevant gift conditions.

From the following basis, an individual can claim a deduction on gifts and donations if they meet some specific criteria:

  • Gift of money: Voluntary gift of $2 or more to an approved organisation.
  • Property above $5000: Property can be claimed for tax deduction if it is not purchased within 12 months prior to the date on which the donation was made. Australian Taxation Office will decide the value of the property.
  • Stocks: As long as the stocks do not create tax loss, individual can claim the market value of the stock on the day which it was donated.
  • Shares: If the market value of the share is greater than $2 and less than $5000, individual can claim for tax deductions for shares.
  • Bushfire & Flood Donation: If an individual made a donation to bucket collections for bushfire and flood victims of $2 or more, he/she can claim for tax deduction for the contribution without any receipt provided contribution does not exceed $10.

 

Nevertheless, in some areas, tax deduction cannot be claimed on gifts and donations. And these are:

  • Raffle or art union tickets;
  • Items (e.g. chocolates & pens);
  • Cost of attending a fundraising dinner even if the costs exceeds the value of dinner;
  • Membership fees;
  • Payments of school building funds made (e.g. increase in school fees);
  • Payments where individual has an understanding with the recipient that the payments will be used to provide a benefit.

COST OF MANAGING TAX AFFAIRS

Costs that are related with managing individual’s tax affairs are comprehensively tax deductible. One can claim on these costs in compliance with his/her legal obligations relating to another person’s tax affair.

Individual can claim a deduction for expenses incurred in managing tax affairs, if it includes:

  • Preparing and lodging tax return and activity statements;
  • Travel associated with obtaining tax advice (e.g. travel costs of attending a meeting with a recognised tax advisor);
  • Appealing to the Administrative Appeal Tribunal or courts in relation to individual’s tax affair; and
  • Obtaining a valuation needed for a deductible gift or property.

One can also deduct the expenses, which was incurred while lodging and preparing the individual’s tax return. These include:

  • Buying tax referral materials;
  • Lodging individual’s tax return through a tax agent;
  • Obtaining advice from a registered tax advisor (e.g. registered tax agent, barrister or solicitor); and
  • Dealing with ATO about one’s tax affairs.

Note: Individuals generally incur these expenses in the year they pay tax.

In two scenarios, one cannot get to claim tax deduction on the costs of managing tax affairs. These are:

  • Cost of an advisor who is not registered; and
  • Tax shortfall and other penalties imposed or failing to meet the obligations.

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