Training can seem like a worthy investment indeed. After all, having a workforce that is continually developing their skills, knowledge and capabilities is a smart way to keep your business on top of its game. Yet as an employer you must not forget to consider the relationship between training courses and tax.

BLOG: Training and tax: a relationship to consider carefully

Training courses can take many forms. Seminars, webinars and one-day workshops are all examples. Certainly you can claim deductions for the full costs of educating your employees in this way. You can even claim travel costs where your staff members need to make some form of commute to attend their training. Fringe Tax Benefits (FTB), however, is a frequently overlooked consideration yet it does come into play when you place employees In training courses.

Consider this. When you pay an employee’s work-related course fees this is generally considered a fringe benefit. As such FBT applies. But what about the ‘otherwise deductible’ rule? The ‘otherwise deductible rule’ implies that if the employee had incurred the expense of their training themselves, they could claim a deduction for this expense. Furthermore, FBT legislation allows a full or partial reduction of FBT payable so long as the ‘otherwise deductible’ rule is met.

Hypothetically, an employee can claim a deduction for an education expense. Some criteria apply though. The education or training course must:

  • Have a satisfactory connection to an employee’s current role; and
  • Uphold or advance the skills or knowledge needed for the employee’s current employment; or
  • Trigger an income boost for the employee

Where training or education has no connection to an employee’s current employment, they cannot claim a deduction. Not even if their resultant upskillng helps them secure new employment.

If you are footing the bill for employee membership fees and subscriptions, you may also find specific items are exempt from FBT. An example of such an exemption is subscription to a professional journal.

Continuous training helps keep your staff at the cutting edge of latest market skills, knowledge and innovation. Just be certain to weigh up your FBT entitlements and obligations.