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. 

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