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Claiming self-education expense deductions

Individuals upskilling and educating themselves during these down times may be eligible to claim a deduction for their self-education expenses. The deductions apply to self-education activities that are directly related to an individual’s work as an employee.

In the case that individuals are looking to claim self-education expenses based on a course’s relation to their work, the relation must mean:

There are many types of expenses you can claim as part of your self-education deduction, including:

Work-related self-education expenses cannot be claimed as part of a deduction. These expenses include travel expenses, child care costs related to attendance of courses and capital costs of items (e.g. computers, desk) acquired for self-education purposes.

Keep in mind that self-education courses which enable individuals to get new employment are not eligible for deduction claims. Some expenses also need to be apportioned between private purposes and use for self-education such as travel costs and depreciating assets. You will need to estimate your apportions and provide information on such expenses to be eligible to claim.

For more information on what you claim as self-education expenses, visit the ATO website or consult with a financial advisor.

Posted on 11 June '20 by , under Tax.

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Tax on super death benefits for dependants vs non-dependants

A super death benefit is the super paid after a person's death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

  • A child of the deceased who is under 18 years of age,
  • A spouse or former spouse of the deceased,
  • A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
  • A financial dependant of the deceased.

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

  • Withdraw it as a lump sum, or
  • Receive an account based income stream.

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

  • The deceased was at least 60 years of age at the time of death
  • The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

  • The payment is made as a result of the SMSF member passing away,
  • The payment is provided to a non-dependent for tax purposes,
  • The payment has a taxable component.

Non-dependants must calculate how much money in the super account is a:

  • Tax-free component,
  • Taxable component the super provider has paid tax on (taxed element),
  • Taxable component the super provider has not paid tax on (untaxed element).

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).

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