Accounting For Psychologists Newsletter #5

Hi Fairuz and Welcome to the November edition of Accounting for Psychologists Newsletter.

• Self-Education tax deductions
• Keeping your receipts and the ATO app

Important Dates for Tax

Self-Education Tax Deductions

The golden rules of claiming a tax deduction for self-education related expenses:

The self-education must either:   

Maintain or improve the specific skills or knowledge you need to perform your current employment activities

OR  

Result in (or is likely to result in) an increase in your income from your current employment activities (reference Visit Website

• You must have spent the money yourself and not have been reimbursed
• You must have a record to prove it. Keep your receipts!
• You can only claim the study related portion of an expense (e.g. your computer may be for study use as well as private use.  You will need to work out how much you use it for study and how much you use it privately.  Then you can claim the study related portion of the cost of your computer as a tax deduction.)

Expenses you can claim:

Course related expenses

• Course and tuition fees (including those payable under FEE HELP)
•  Textbooks
• Academic journals
• Student union fees
• Student services and amenities fees
• Equipment costing less than $300 e.g., printer, desk
• Computer or laptop
• Computer repairs
• Internet and data usage (excluding connection fees)
• Phone calls
• Postage
• Photocopying
• Stationery e.g. notebooks, pens, printer ink, paper

Home expenses 

• Additional running expenses if you have a room set aside for self-education purposes
• Such as the cost of heating, cooling and lighting and cleaning that room while you are studying in it.  (Note that you cannot claim your mortgage, rent or council rates.) You can use the cents per hour method or the actual cost method to record these. If you’re not sure which method to use, your accountant can advise you.

Travel expenses

• Accommodation and meals if you are away from home for your study for one night or more
• Travel from home or work to your place of study – by car or public transport (note if your journey continues from place of education to work or home you cannot claim that part of the journey) 

• This includes car expenses such as fuel, repairs etc. You can claim using the cents per kilometre method or the logbook method.  If you’re not sure which method to use, your accountant can advise you.

Depreciation expenses

• Decline in value of depreciating assets costing more than $300 e.g., printer, desk, office chair
• Computer upgrade

Loan expenses

• Fees paid on some study loans
• Interest on a loan to pay tuition fees 
• Interest on money you borrow to buy a computer

What you can't claim

Example 1: Cara

Cara is a psychologist working for a busy city clinic.  She has decided to continue to work full-time and to study part-time for a Master’s in Psychology.  As this is directly related to Cara’s current employment and it will improve her skills and earning capacity, she will be able to tax deduct her self-education expenses.  After the first three months, Cara realises that she’ll need more time to study.  She continues to work 2 days a week.  As she is still employed as a psychologist Cara can still claim a tax deduction her self-education expenses.  At the start of the second year of her Master's degree Cara decides to dedicate herself to study.  She stops working and studies full-time.  As Cara is no longer “improving the specific skills or knowledge she needs to perform her current employment activities”, she would not be entitled to claim her self-education expenses for the second year.  Note that this would also be the case if Cara were to work part-time in a different job, for example as a receptionist at the psychology firm. 

Example 2: Ian

Ian is a psychologist working in large hospital.  He becomes very interested in drug treatments for mental illnesses and decides to study medicine with the aim of becoming a psychiatrist.  Although psychiatry and psychology are both professions specialising in mental health, this course would not improve Ian’s skills or knowledge for his current employment.  His self-education expenses for his medical degree would not be tax deductable.

Example 3: Alicia

Alicia is a psychologist and one of the owners and directors of ABC Psychology Pty Ltd. Alicia decides to study for an MBA and ABC Psychology Pty Ltd will foot the bill. In this case Alicia is not paying for the studies herself so she cannot tax deduct the tuition costs of her self-education.  However, ABC Psychology Pty Ltd will be able to claim the deduction as training expenses.

If Alicia were paying for the course herself, she would be eligible to claim her self-education expenses connected with the MBA as a tax deduction because the MBA is connected with her current employment.

Example 4: Breana

Breana is a psychologist and one of the owners and directors of ABC Psychology Pty Ltd. She takes a self-development course which covers leadership, self-confidence, communication, and positivity.  Leadership is directly related to her current position as a director.  The other subjects. only relate in a general way to her current employment as a company director.  Breana can apportion and claim 25 % of the costs of she incurs taking the course. 

Keep your receipts! The ATO App

• Date
• Amount of the expense
• What goods or services it was for
• Name of the supplier

My book Sorted. is now available. 

• Personal Budgeting
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