The business community has reacted negatively to the federal government’s plans to cap self-education expenses at just $2000, saying it will harm the ability for businesses to invest in workers to learn new skills.
Treasurer Wayne Swan announced tax deductions for self-education expenses will be capped at $2000 a person per year from July 1, 2014, saving the government an estimated $520 million a year as part of its major education reforms.
The move is being criticised as deterring workers from obtaining higher education degrees, such as MBAs, which incur high expenses.
“Education expenses include formal qualifications and associated tuition fees, textbooks, stationery and travel expenses and also conferences, seminars and self-organised study tours,” Swan said in a statement.
The majority of people engaging in self-education will not be affected by the change, but executive director of the Council of Small Businesses of Australia, Peter Strong, told SmartCompany $2000 is not a large enough deduction.
“I understand capping, but $2000 is unlikely to cover the cost of the course. If they want to cap it, you’d think it would be at $5000, and then the government could promote the fact that you can spend up to that much on training.”
“This is a punishment for people wanting to better themselves in the workplace, it impacts someone trying to learn accounting or marketing skills, something that’s going to benefit them and their workplace,” he says.
But director of studies at Australian Workplace Training, Annette Tsouris, told SmartCompany a tax deduction of $2000 was “reasonable”.
She says Australian Workplace Training offers some courses at under $1000, but for people already in employment looking to up-skill, the average price of a course is around $3000.
In announcing the cap, Swan says in the current system, in which self-education tax deductions are “unlimited”, people are able to “enjoy significant private benefits at taxpayers’ expense”.
“Without a cap on the amount that can be claimed under this deduction, it’s possible to make large claims for expenses such as first class airfares, five star accommodation and expensive courses,” he says.
According to the latest figures from the Australian Taxation Office, 672,860 people claimed self-education expenses in the 2009-2010 financial year, totalling $1.1 billion.
Workers which claimed the largest deductions were people in the medical services industry, vets and some employees in the superannuation and IT industries.
Swan says the average cost of formal qualifications is less than half of the proposed cap and the cost of attending conferences, seminars and workshops is typically a few hundred dollars.
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Swan also argued the cap on deductions will make the system fairer and the government intends to consult with employees and employers to “better target this concession while still supporting essential training”.