The Government has released a Discussion Paper seeking comments on its proposal to introduce a $2,000 cap on tax deduction claims for work-related self-education expenses per person from 1 July 2014. The proposal was announced by the Treasurer on 13 April 2013 “as part of a package of reforms to make a down-payment on the National Plan for School Improvement”. The proposal was also confirmed in the 2013 Budget.
The paper examines the current treatment of education expenses including what qualifies as an education expense, and works through a range of issues related to the proposed cap, such as the effect of the cap on the depreciation of capital assets relating to education, the current $250 no-claim threshold and personal services income. The proposed changes in the income tax legislation and FBT legislation are also outlined.
COMMENTS are due by 12 July 2013.
[LTN 105, 3/6/13]
Extract from Discussion Paper – Summary of Consultation Questions
1. In your industry or field, are there studies or courses that are compulsory and must be completed in order to meet licence requirements?
(a) What is the average amount of the expense?
(b) What is the highest amount of the expense?
(c) What is the nature of these courses?
2. Is training undertaken in your industry predominantly held in Australia or overseas? Can you provide examples?
3. In employment relationships, are employees largely obliged to incur work‑related education expenses themselves or are they employer provided? Do you anticipate this changing in response to this measure?
4. Are you aware of examples where education expense deductions can be claimed under the current arrangements, even where significant private benefits are enjoyed?
5. Are there any lessons for Australia in the experiences of other countries with restrictions on education expenses deductions?
6. Should the $250 no‑claim threshold under section 82A of the ITAA 1936 be removed when the $2,000 cap is introduced?
7. How should this be prioritised?
8. What types of assets that relate to an education activity are placed into a low‑value pool or similar small business pool?
9. What are the advantages/disadvantages of the ‘reasonable estimation’ method proposed above?
10. Is the use of low‑value pools under these circumstances appropriate?
11. Are there any unintended consequences from the proposed reforms?
12. What practical aspects of the proposed reforms need further consideration?
13. Are there any interactions with other areas of the tax law that need to be addressed?
14. Do you consider that further amendments will be required to the tax law outside of those already mentioned in the discussion paper?
15. Are there alternative approaches that you would like to see considered? How would they work in practice and are there any precedents in Australia or other jurisdictions?