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Australian Students In Line For Tax Deduction

by Mary Swire,, Hong Kong

15 November 2010

The Australian High Court, in dismissing an appeal by the Australian Taxation Office (ATO), has opened the door to claims by taxpayers who have received Youth Allowance as a university student and may now be entitled to a tax deduction for their education expenses.

In the case under appeal, the Federal Commissioner of Taxation v. Anstis, the issue was whether outgoings incurred by the Ms Anstis by way of "self-education expenses" were deductible from her assessable income in the tax year in question.

The respondent was enrolled as a full-time student undertaking a teaching degree. In her income tax return for the year in question, she returned almost AUD15,000 (USD15,000) as wages income earned as a part-time sales assistant, as well as Youth Allowance income in the sum of AUD3,600.

Ms Anstis then claimed, as allowable deductions, outgoings totalling AUD920 for self-education expenses – including travel expenses, computer depreciation, and textbooks and stationery. On assessment, the ATO disallowed those deductions.

However, the court considered that the respondent's claim was confined to outgoings incurred “in the course of gaining or producing her assessable income”. As Ms Antsis’s expenditure was incurred in pursuance of the course of study for which she was enrolled, it was productive of assessable income and, the court decided, should have been allowed by the ATO.

It is not known how many past students may be eligible to claim a tax allowance for their education expenses, but the potential loss to government revenue has been put at millions of dollars. In the meantime, taxpayers who believe they may be affected by the decision are being asked to be patient whilst the ATO considers the impact. The ATO says that it is giving the matter urgent attention and will release further information as quickly as possible.

TAGS: court | tax | law | Australia | education | individual income tax

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