Sometimes business owners need their employees to develop or grow their expertise and skills in a particular area.

While training courses like seminars and one-day intensive sessions can be a worthwhile investment in your employee’s development, there are still a few things employers should consider from a tax point of view.

Although employers can claim deductions for the full costs incurred when providing education to employees, including aspects like travel costs, many owners tend to forget to consider FBT implications.

Paying for employee work-related course fees generally constitutes a fringe benefit and is therefore subject to FBT. However, FBT law allows a full or partial reduction of FBT payable provided that the ‘otherwise deductible’ rule is met. The ‘otherwise deductible rule’ implies that if the employee had incurred the expense themselves, they could claim a deduction for the expense. 

An education expense is considered to be hypothetically deductible to the employee depending on the type of course or education studied by the employee. The course must have a satisfactory connection to an employee’s current employment, maintain or improve the skills or knowledge required for the employee’s current role, or result in an increase in the employee’s income.

Employees cannot claim a deduction for education expenses if there is no connection to their current employment, even if it assists them in gaining new employment. For instance, a service station attendant undertaking a course in social media management cannot claim a deduction for that education expense unless their employer has installed them as a social media coordinator, and the course is to further that knowledge. 

Specific membership fees and subscriptions paid by an employer are also exempt from FBT (such as subscriptions to a professional journal). 

Upskilling your employees not only grants you an educated employee but a potential tax deduction on top of that. If you’re a business that allows its employees to upskill during work hours, you can claim that back as a training expense. With the rise of businesses enforcing specific days that can be dedicated to training their employees that employees are paid for, this might be something that your business should look into.

What you can claim as an employer and what you can claim as an employee can be similar, but have different taxable consequences. If you are unsure as to what can be claimed as a deductible and what cannot, speaking with a registered tax agent like us can clear up the confusion.