Submission to Treasury on Reform to deductions for education expenses paper

  • Date:05 Jul 2013
  • Type:Policy Submission
On 5 July 2013 the Australian Institute of Company Directors provided comments to Treasury on the discussion paper, Reform to deductions for education expenses.

In summary, our key comments were:

• We do not support the introduction of a broad, arbitrary cap on self-funded work-related education expenses as has been proposed in the discussion paper.

• It is not appropriate nor is it in the nation’s interest to limit the ability for taxpayers to claim deductions for legitimate, work-related education expenses. Supporting ongoing professional development creates a smart workforce and nation, advances Australia’s position in the “Asian Century” and supports our overall long-term economic development.

• We would, however, be supportive of policy changes to the ability for tax-payers to deduct such expenses that are specifically targeted towards genuine cases of abuse (for example, by introducing more rigour on claims for first-class travel or luxury resorts or for expenses with questionable connections to the taxpayer’s employment).

• There are a large numbers of taxpayers who cannot rely on an employer to fund their work-related educational needs. With respect to the participants in our own education programs, a large number are small business owners, directors of not-for-profit organisations, as well directors of large listed companies (many of whom are non-executive directors). Even in the case of large organisations, course participants may also elect to self-fund their own education where a board has no budget for director education. As these directors will not be able to access employer-funded education, their ability to continue to self-fund work-related education will be directly impacted by the proposed cap.

• While we recognise that directors will continue to invest in professional development and may self-fund their education, we know from feedback we have received from our members on pricing that this personal investment has its monetary limits. There is a very real chance, therefore, that the introduction of the cap will result in directors not being able to access the education that they need.

• Any reduced financial capacity of participants to be able to afford education programs could impact negatively on the quality of the education that is able to be provided by organisations such as our own.  This is important in a post-GFC environment, as APRA Chairman, John F Laker, highlighted in his reflections on the GFC, delivered in a speech on ‘The importance of good governance’ in February 2013. We believe his remarks aptly capture the economic risks and potential unintended consequences of discouraging ongoing director education.

“A board of a financial institution has the ultimate responsibility for setting the institution’s overall strategy, determining its risk appetite and overseeing the management and control of risk within that appetite, and ensuring there is a robust decision-making process with appropriate executive talent in place.  When a board does not exercise that responsibility astutely, the consequences for the institution can be severe —poor strategic decisions, excessive risk-taking, substantial losses, and financial failure.  Ineffective governance is as much, if not more, the story of the crisis as are inadequate regulation or supervision.” 

He acknowledged the education and training of directors and the Australian Institute of Company Directors’ recently expanded compulsory professional development requirements.

“Directors’ institutes have also been active in promoting the education and training of directors. Here, I am pleased to acknowledge the extensive and world-leading programs of the Australian Institute of Company Directors and its recently expanded compulsory professional development requirements.”  

• Our members have also raised concerns with us regarding the potential economic impact on Australian professional conference destinations of this policy. If introduced, some Australian states or regions, such as North Queensland, Darwin and Tasmania that rely on the economic boosts that the visitations of large numbers of conference delegates can provide, may miss out in preference of more densely populated areas.
• In our view, the extra revenue that may potentially be raised through the introduction of the proposed cap would be far outweighed by the long-term costs to Australia of having a less-educated workforce.

Download the above policy submission (PDF 145 KB).