The Institute of Public Accountants has called upon the federal government to follow through with its proposal to expand tax deductions to training and education that is unrelated to an individual’s current employment activities.
At the present time, taxpayers are only eligible to claim tax deductions for self-education expenses that are directly related to their position of employment.
The disruption caused by globalisation, intergenerational forces, technology, the changing nature of work and the labour market are driving the need for a continued upgrading of skills throughout life.
The Institute of Public Accountants argues that Australia’s current tax system inhibits rather than incentivises it. Those who have the financial capacity to invest in themselves should be encouraged to do so, particularly in a post-pandemic environment where jobs have been displaced and overseas immigration of skilled labour has been curtailed.
The Institute of Public Accountants also believes that expanding self-education deductions will also remove the need for the federal government exempt employers from the 47 percent fringe benefits tax (FBT) for retraining and reskilling soon-to-be-redundant employees, a budget measure that has now been implemented in draft legislation.
The Treasury is currently deliberating about making changes that will enable claims to be made on training courses that would have the capacity to enhance an individual’s employment prospects from outside their current profession.
Due to the ever-evolving labour markets, millions of Australians are expected to work in multiple industries over the duration of their lifetime. Due to the emergences of new technologies, by the end of the current decade many Australians will most likely find themselves working in jobs that are yet to be created. This is evident as jobs such as a social media marketing practitioner didn’t exist in a world before Facebook.
Similar to countries such as Germany and Japan, Australia is starting to face the issue of having an ageing workforce. Due to the current closure of Australia’s international borders as a consequence of the current pandemic, many industries across Australia have suffered from the huge loss of skilled migrant workers who are unable to travel to Australia to work. In order to fill the void left by migrant workers, it is crucial for Australians to be retrained and reskilled to make themselves employable in these industries that are in desperate need of skilled workers.
“It is important to understand the changing labour market needs, the skills requirements of current and future jobs, the structural shifts that will occur and the skilling and retraining needed to get people to gain and sustain employment,” the Treasury said.
“A new deduction could target assistance to areas of current labour demand or forecast job growth.” The Treasury also contends that full proof will be required to make sure any new deductions are not being abused. This will be done by a process of keeping detailed records and receipts. This will also include keeping the details of the course and it’s training provider. This is so that the deduction can be effectively administrated, protect against revenue loss and assist mitigate compliance concerns.
If changes are made to the current deduction system, The Treasury wants to introduce additional integrity measures so that the risk of the deductions being misused is less likely to occur. Tax concessions cost money and therefore if the initiative is introduced, it would be appropriate for the worker who is undertaking the training to share that financial risk.
It is most likely that if the changes were introduced that half of the upfront deduction would be quarantined until the worker is earning money from any activity associated with the retraining they have chosen to undertake. The Treasury believes that it is crucial to ensure that the taxpayers aren’t wearing the entire cost of the education fees especially in instances where the retraining doesn’t result in the employment of the individual who has undertaken the training.
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