Administration, ATO, SMSF, Tax

Confusion over education deductions

Education expenses Deduction ATO Taxation ruling

SMSF trustees are still attempting to claim certain education expenses as deductions despite recent ATO guidance on the matter.

SMSF trustees are incorrectly claiming specific self-education expenses as fund deductions despite the ATO recently providing clarification on this area, according to a technical specialist.

“Subscriptions and other education courses are [still] sometimes incorrectly claimed as a deduction because while you can claim subscriptions for memberships to professional industry bodies, that’s where the buck stops,” ASF Audits head of education Shelley Banton told attendees of a webinar held by her firm today.

Banton said the key to determining whether a fund expense is deductible rests in the purpose of the education activity being undertaken and whether the expenses are incurred in gaining or producing a fund’s assessable income and if they are capital in nature.

She added the regulator had not changed its view substantially in the recent Taxation Ruling (TR) 2024/3 since an ATO private binding ruling (PBR) several years ago.

“If we look at the PBR released back in September 2020, we know that it still supports the ATO’s view that [certain] types of expenses are deductible,” she noted.

“What happened in this PBR is the trustees asked whether the fund could claim a deduction for reimbursement of the costs of a course and subscriptions in relation to share trading.

“And what the ATO said was the shared trading activities of the fund are subject to the capital gains tax provisions and so any expenditure on the course and the subscriptions used is in relation to generating those capital gains.

“So it’s capital in nature and it’s not deductible by the fund.”

She encouraged SMSF auditors to consult TR 2024/3 and the PBR together when conducting audits on funds claiming these expenses.

“Bear that PBR and tax ruling in mind when the fund’s looking to claim deductions in this area because some of the courses are expensive and the ATO may not allow the deduction, especially if the trustee obtains a personal benefit,” she said.

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