Self-education tax cap axed, but underlying issues still a problem

Thursday, 7 November 2013  Media Alerts

Top takeaways from this article

  • "The self-education deduction cap is gone, but when is the underlying integrity issue going to be addressed?" 
  • Labor announced the $2,000 cap on self-education expense deductions in April 2013 to save $266 million over the forward estimates.​​

"The self-education deduction cap is gone, but when is the underlying integrity issue going to be addressed?" said a senior academic at UNSW's Australian School of Business, in response to the announcement from the federal government that it will dump a $2,000 cap on how much people can claim on work-related self-education expenses.

Associate Professor Dale Boccabella resp​onded "This decision has been widely welcomed. The government's justification for dumping the former government's cap proposal was in part based on there being 'no credible evidence of substantial abuse of this deduction.' This may be true, but the former government claimed some taxpayers are deriving a significant private benefit from their self-education expenditure, and that the general body of taxpayers should not have to carry this. Travel on first class air fares and taxpayers staying in five star accommodation was expressly mentioned by the previous government."

Labor announced the $2,000 cap on self-education expense deductions in April 2013 to save $266 million over the forward estimates. However the Treasurer Joe Hockey now says that is "flawed policy" that will be dumped.

Education expenses that would have been subject to the cap included formal qualifications and tuition fees, textbooks, stationery and some travel expenses.

Boccabella adds "the former Government did have a sound basis for arguing that capping can be justified on the private benefit aspect. There has been a steady stream of tax cases involving claims for overseas and interstate travel where the taxpayer attaches leisure to his or her attendance at a relevant conference, study tour, and so on. The tax tribunals have been generous when it comes to apportioning expenditure on air travel between the deductible conference attendance and the non-deductible leisure pursuit. In the first instance, the fault lies with the tax tribunals, but it is the role of government to address what might be perceived poor decisions of tax tribunals."

However Boccabella does warn "the Government​​ has not stated the basis for the advice it has received that there is no 'substantial abuse' of the current rules. In any event, using the word 'substantial' seems too high a threshold of tolerance when it comes to assertions of deductions being claimed for private benefits. It would be preferable if the assertions of private benefit were examined in a transparent manner. This is the only way of testing the former government's assertions in this area of the tax system."

For further comment call Dale Boccabella on 02 9385 3365.

Media contact: Julian Lorkin: 02 9385 9887​​

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