Self Education Expenses – Youth Allowance

Some joy for the little guy/generation Ys out there to allow self education costs to be claimed against youth allowance received.

It’s a case similar to the movie “The Castle” where the little guy/lady takes up the challenge and fights his/her case on their own against the resources of a larger institution, and in this case, against the Australian Taxation Office (“ATO”).

In essence the original case was about a young woman that was studying at university in 2006 to become a teacher.  The taxpayer here was not “teaching” as yet, but was receiving youth allowance whilst studying at university together with wages earned as a part time retail assistant.  The taxpayer claimed education costs incurred in undertaking her university course, arguing these costs were necessary (by having to attend university) in order to receive the taxable youth allowance.

Initially, this case was heard in the Administrative Appeals Tribunal and the Tribunal found in favour of the ATO.  The taxpayer appealed decision to the Federal Court, and the Federal court held for the taxpayer, agreeing it was necessary for the taxpayer to be enrolled at university and incurring her course costs, in order for her to derive the taxable youth allowance.  The ATO appealed (clearly they didn’t like the umpire’s decision) and the Full Federal Court held once again for the taxpayer.  Still not happy, the ATO appealed to the High Court, and the High Court unanimously held in favour of the taxpayer.  So the little person won this fight in the end.

The ATO has accepted the High Court’s decision, is amending previous tax rulings it issued on the deductibility and is considering how similar types of allowances may be impacted by the court’s decision.

What’s the government’s take on all of this? 

The Assistant Federal Treasurer has stated in a press release the Federal Government will not amend the law to deny a deduction retrospectively.  However the Federal Government will look further into this and decide whether to change the law prospectively.  Stay tuned.

What does it mean for those taxpayers that got youth allowance and lodged previous tax returns without a deduction?

The ATO has announced it will amend income tax assessments for the 2007 through to 2010 tax years to allow a deduction of $550 for each year taxpayers were eligible to claim a deduction for self education costs.  The ATO will write to those taxpayers eligible for this in coming months.  For any taxpayer that has not lodged his or her 2010 tax return, a claim can be made in their 2010 tax return for the relevant education costs incurred whilst deriving their youth allowance.

What are eligible self education costs?

The ATO’s website has a list of what the eligible self education costs would be available to be claimed against the youth allowance, but in summary they would include:

  • tuition fees, including fees payable under FEE-HELP (this does not include expenses paid under HECS-HELP)
  • FEE-HELP is a loan for eligible fee-paying students enrolled at an eligible higher education provider or Open Universities of Australia
  • textbooks, professional and trade journals
  • stationery
  • photocopying
  • computer expenses
  • student union fees
  • running expenses if you have a room set aside for work-related study purposes – such as the cost of heating, cooling and lighting that room while you are studying in it
  • Depreciation on furniture, computers etc used to help with study.

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