How the cap on education tax deductions will affect you

The federal government plans to cap the annual tax deduction for self-education expenses at $2000 a year from next July.

If implemented, it will mean 2013-14 will be the last year when no cap applies.

Given this, anyone considering undertaking an expensive course of study to upgrade their work-related skills has an incentive to act now rather than wait.

Not that money spent on self-education automatically qualifies as tax deductible.

As the tax office explains, to get a deduction for self-education costs you need to work and study at the same time and satisfy at least one of the following conditions:

• you are upgrading your qualifications for your current employment;
• you are improving specific skills or knowledge used in your current employment;
• you are employed as a trainee and you are undertaking a course that forms part of that traineeship;
• you can show that at the time you were working and studying your course led, or was likely to lead, to an increase in employment income.

If you satisfy any of these requirements, the cost of tuition is likely to be deductible, along with a range of related expenses such as textbooks, ancillary items such as stationery and computer expenses, and accommodation and meals when you are away from home for one night or more.

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