33 – Self-education costs for financial planners

Koresh is a Dover adviser. He has a BA from the University of Western Sydney, and completed a Kaplan RG 146 diploma of financial services about six years ago.

Koresh left the NAB three years ago to start a new financial planning group inside an established CPA firm in Sydney. Koresh keeps up to date with Dover CPD but is concerned his overall level of knowledge is low compared to his accountant counterparts. They each spent at least three years in full time accounting/business/economics training, and seem to have a better handle on relevant issues, particularly pertaining to tax.

Koresh has enrolled in an on-line Masters of Financial Services degree at the University of New England. It’s a great course, and very relevant and very recommended to all financial planners.

Koresh is concerned about the deductibility of the fees and related costs.

ATO materials on self-education

First up, I sent Koresh this link to the ATO website, which takes the reader through the basic questions such as what are self-education expenses and when are they deductible. The link is here: ATO self-education resources.

Self-education costs are the costs connected to a work related course at a recognised place of education. On-line universities are obviously recognised places of education, but the concept also includes TAFEs, RTOs, schools and other educational institutions.

The costs have to be connected to the student’s current or expected future assessable income from their current employment. Koresh’s costs clearly satisfied this test: he is earning about $100,000 a year as a financial planner, and it’s a Master of Financial Services degree. No problem there.

(But sometimes there are problems there. One problem involved a dentist, who aspired to be an orthodontist, and a disallowed claim for the cost of attending an overseas orthodontics course. The ATO said he was not yet earning orthodontic income and therefore the orthodontic training. This seems a strange result, since he was earning assessable income as a dentist and, obviously, orthodontic principles are relevant general dental practice. But it does show how the ATO can take a very narrow view, against common sense, where money is involved. The real lesson here is don’t expect common sense from the ATO.)

Koresh intended to attend some lectures on the UNE campus. The costs of doing this, including travel, accommodation and meals are deductible. 

Koresh’s other deductible costs include his computer, his I Pad Pro 9 (used for viewing lectures), his I Pad Pro pencil, his deluxe ear phones, stationery, union fees, tuition fees (not HECS-HELP type fees), and so on.

What if Jelena goes to New England with Koresh?

Koresh asked if his travel and accommodation costs would be only 50% deductible if his wife Jelena was with him when he visited the campus. Jelena is not a student and basically just enjoys a weekend away from home.

The answer is no, except for her meal costs. This is because his car costs and accommodation costs are the same whether she is with him or not.

The $250 non-allowable component

In some cases the deductible amount of a taxpayer’s self-education costs are reduced by $250. There is no logic behind this non-allowable component. It’s just there. And it’s been there, un-indexed, for more than thirty years!

This $250 is in turn reduced by certain costs, including the cost of capital items such as a desk, child-care costs and non-deductible but necessary travel costs.

The Dover Group