Sometimes business owners need their employees to develop or grow their expertise and skills in a particular area. Employers can claim employee education deductions for the costs incurred.
While training courses like seminars and one-day intensive sessions can be a worthwhile investment in your employee’s development, there are still a few things employers should consider from a tax point of view.
Many owners tend to forget to consider FBT implications.
Paying for employee work-related course fees generally constitutes a fringe benefit and is therefore subject to FBT. However, FBT law allows a full or partial reduction of FBT payable provided it meets the ‘otherwise deductible’.
The ‘otherwise deductible rule’ implies a deduction for the expense is available if the employee had incurred it.
Conditions To Meet For Employee Education Deductions
An education expense is deductible to the employee depending on the type of course or education studied by the employee. The course must:
- Have a satisfactory connection to an employee’s current employment;
- Maintain or improve the skills or knowledge required for the employee’s current role; or
- Result in an increase in the employee’s income.
Employees cannot claim a deduction for education expenses if there is no connection to their current employment. Not allowing a deduction even applies if it assists them in gaining new employment. For instance, a service station attendant undertaking a course in social media management cannot claim a deduction for that education expense unless their employer has installed them as a social media coordinator, and the course is to further that knowledge.
Specific membership fees and subscriptions paid by an employer are also exempt from FBT. Items such as subscriptions to a professional journal would be applicable.
Upskilling your employees not only grants you an educated employee but a potential tax deduction on top of that. If you’re a business that allows its employees to upskill during work hours, you can claim that back as a training expense. With the rise of businesses enforcing specific days dedicated to training their employees that employees receive wages for, this might be something that your business should look into.
What you can claim as an employer and what you can claim as an employee can be similar but have different taxable consequences. If you are unsure what can be claimed as a deductible and what cannot, speaking with a registered tax agent like us can clear up the confusion. Start the conversation here.
