ATO appeals court tax ruling on deductibility of education expenses vs Youth Allowance income

Following our previous coverage on Symone Anstis v. Federal Commissioner of Taxation, the Australian Taxation Office has decided to appeal the Tribunal's decision. 

In other words, until the ATO is defeated once again in court, it will not allow education expenses to be claimed against "Commonwealth education assistance schemes".

SUMMARY FOR THOSE WHO MISSED THE CASE RULING

SYMONE'S CASE

Symone (the taxpayer) is claiming that her education expenses should be tax deductible because being enrolled in a tertiary education is one of the prerequisites for her entitlement to Youth Allowance.

So, she claimed various expenses such as textbooks, depreciation on the computer, travel, etc. 

COMMISSIONER'S CASE

The ATO claimed that this was bogus because she incurred these education expenses to finish her teaching degree and eventually qualify as a teacher. 

They are arguing that the expenses are not deductible because it wasn't incurred to derive an income. That is, she was not earning money as a teacher yet at this point in time.

They also rejected the argument that the education expenses was a valid deduction to get Youth Allowance income.

TIMELINE OF EVENTS

17/11/2006  ATO issues an amended tax assessment to Symone

27/11/2006  Symone objects to amendment

05/12/2006  ATO disallows Symone's objection 

12/12/2006  Symone goes to Tribunal to dispute ATO decision

18/04/2007  Tribunal rules in favour of ATO

21/07/2008  Symone appeals to the Federal Court

01/04/2009  The Federal Court rules in favour of Symone

29/05/2009  The ATO appeals against the Federal Court decision 

SUMMARY

We will have to wait and see whether or not the ATO's appeal will be allowed. If so, then the whole legal circus starts again. 

We will update everyone on the progress of this tax case. 

In the meantime, the ATO has issued a statement that it will continue to treat education expenses as non-deductible against Youth Allowance (and other government assistance) until a FINAL decision is made.

SPECIAL NOTE FOR LAW STUDENTS OR TAX LAW ENTHUSIASTS (!)

The case judgement is a very useful and straight-forward explanation of basic tax law. That is, the explanation of how revenue recognition and tax deductibility works.

The case judgement can be found here.

From the AusTax team. 

The #1 provider of Australian tax news on twitter.

Is your employer taking out enough tax from your pay?

This is a quick post for those of you who are employees...

Have you ever happily lodged a boring tax return with just your employment income, NO extra income, NO exciting tax deductions and then get hit with a MASSIVE TAX BILL?

WELL... READ ON, THIS MAY JUST BE THE REASON..!

As part of your payroll, tax is withheld by your employer every pay period. The total tax withheld for the year forms the amount of tax that shows up in your PAYG Payment Summary (aka Group Certificate).

Assuming that your only taxable income is from your job, you shouldn't have to pay any additional tax when you lodge your income tax return. 

This is because your employer has already taken tax out every week/fortnight/month/etc throughout the year.

HOWEVER..!

How do you know that the CORRECT amount of tax is being withheld from your pay?

This is what you do...

You simply cross-check the tax withheld on your payslip against the ATO PAYG Withholding Tax Tables.

The ATO provides these simple tax tables to employers to allow them to easily deduct the correct tax from their employees. However, mistakes do happen and it is worthwhile double-checking.

This is what you need to know beforehand (HINT: have your payslip handy!): 

1. What is your pay cycle? ie Weekly, Fortnightly, Monthly

2. How much are you getting paid per pay cycle? 

3. Do you have HECS/HELP or SFSS?

4. Do you have leave loading? (most likely not)

5. Are you claiming a tax-free threshold for this employer?

Once you have the above information, you can use the Tax Tables that your employer also use. Here's the link to the ATO's PAYG Withholding Tax Tables.

Or....

If you are really lazy or just not into numbers (we don't blame you), then click on this link to the ATO's PAYG Withheld Calculator.

You enter all the information, click on Calculate and voila..! The calculator shoots out the Tax Withheld amount which should match up with your payslip.

If it doesn't match AND you answered all the calculator questions correctly, it's time to talk to your employer's HR or Finance team. 

It could be a simple case of ticking the wrong box when you first filled in your TFN Declaration form.

Note: The rates changed in July 09. So, when you will get a different tax withheld amount when you run the calculator in July 09.

GOOD LUCK..!

RIGHTING TAX WRONGS, ONE AT A TIME...

From the AusTax team. 

The #1 provider of Australian tax news on twitter.