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08 Apr 2016

The Federal Government has reportedly scrapped plans to axe or cap tax deductions for work-related self-education expenses just days after the AMA warned it would campaign against the idea in the lead-up to the Federal election.

The Australian Financial Review has reported the Government has dumped the idea of trading away work-related tax deductions to help fund business tax cuts in next month’s Budget, and will instead leave tax deductions alone.

The policy change came after the AMA said discussions had been held about resurrecting the Scrap the Cap alliance of more than 70 professional and educational organisations to campaign against any change to tax deductions for self-education expenses.

There had been suggestions the Government was considering imposing a standard deduction for work-related expenses, which AMA Vice President Dr Stephen Parnis said would “effectively be a cap by another name”.

In 2013, the former Labor Government announced plans for a $2000 cap on tax deductions for work-related self-education expenses, a measure that would have disadvantaged thousands of workers who have to undertake continuing education as a condition of their employment.

The proposal provoked outrage among doctors and other professionals, and the AMA was among 70 organisations that formed the Scrap the Cap Coalition to fight the change.

The Abbott Government won plaudits when it dumped the idea soon after winning the 2013 Federal election, but there were fears Prime Minister Malcolm Turnbull would reinstate the measure to help narrow the Budget deficit.

In December, the Government revealed its financial position had worsened since last year’s Budget and the deficit was on track to reach $37.4 billion in 2015-16 with no prospect of a return to surplus in the next four years.

Since then, commodity prices have tumbled lower and economic conditions have remained soft, fuelling concerns the Commonwealth’s finances have become even worse.

The Government has talked down earlier suggestions of tax cuts, and is searching hard for savings, including by trying to push more of the responsibility for health and education funding onto consumers and the states.

But Dr Parnis said earlier this week that deductions for self-education expenses should be off the savings list.

He said doctors had to continually update their skills and knowledge throughout their careers, at their own expense, and scrapping the tax break would have created a “huge disincentive”, particularly for junior doctors considering undertaking specialist training.

According to the AFR report, the Government has backed away from changes to work-related tax deductions for political and administrative reasons.

It was thought scrapping deductions, claimed mainly by middle-income earners, to pay for business tax cuts would be highly unpopular, while the impracticality of abolishing all deductions meant the Government would be left to tinker with individual measures, which would not deliver sufficient savings to be worth the political trouble they would cause.

Adrian Rollins

Published: 08 Apr 2016