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IPA backs Treasury proposal to expand education deductions

The Institute of Public Accountants has shown “wholehearted support” for a proposal from the federal government the expand education and training expense deductions for individuals.

IPA backs Treasury proposal to expand education deductions
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  • Adrian Flores
  • January 18, 2021
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In a Treasury Discussion Paper submission, IPA chief executive Andrew Conway indicated the IPA’s support of any initiatives that encourage individuals to upgrade their human capital skills over their working life.

Mr Conway said the proposal in the Discussion Paper fits well with those ideals, and urged the federal government to move on this proposal as quickly as possible, considering the country’s labour market shortages and the loss of genuine productivity needed to lift the economy.

“Human capital is the fundamental driver of productivity. There are strong linkages between education and entrepreneurial activity, particularly for the small business sector and the wider economy,” he said.

“The economy has been savaged by the financial impacts of COVID and we are supportive of initiatives that are aimed at improving our productive capacity.

“However, along with COVID, our labour supply market is facing the issues of an ageing workforce, the loss of skilled migration and many business closures due to the pandemic. All of which require the need for individuals to reskill to meet new opportunities.

“Many individuals will have multiple careers over their lifetime, which indicates a strong need for continued upgrading of skills.”

Mr Conway noted that current tax settings do not support or encourage the retraining and reskilling once an individual has commenced earning an income in their chosen field.

He said the requirement for a tax deduction is limited to expenses in gaining or producing assessable income to an individual’s current employment activities.

In response, Mr Conway believed the proposed measure in the Discussion Paper will add to the current support for higher education while addressing a void in the existing arrangements for individuals who are currently earning an income and may be unable to access any of the existing support initiatives.

Further, he said it also assists individuals who work for smaller entities that do not provide employer support for retraining or reskilling.

“The cost to revenue of implementing this measure will be more than offset by the additional productive capacity added to the economy through a more skilled and flexible workforce,” Mr Conway said.

“We appreciate that tax concessions cost money and therefore we propose, that if this initiative is implemented, that the risk be shared with the individual who proposes to take advantage of the concession.

“Quarantining half the upfront deduction until the individual earns income from an activity associated with the retraining is an appropriate model to ensure that taxpayers do not wear the entire cost of education outlay in cases where the retraining does not result in the furtherance of a new activity.

“In areas of skill shortages (to be defined), we are not opposed to the concept of full deductibility. Both these measures will ensure the new initiative achieves its policy intention through better targeting of the concession.”

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