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Tax Laws Amendment (Education Refund) Bill 2008

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2008

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Tax Laws Amendment (Education refund) Bill 2008

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Treasurer, the Hon Wayne Swan MP)



T able of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1            The Education Tax Refund............................................... 5

Index................................................................................................................. 23

 

 



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

Commissioner

Commissioner of Taxation

DEEWR Secretary

Secretary of the Department of Education, Employment and Workplace Relations

FaHCSIA Secretary

Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs

FTB

Family Tax Benefit

ITAA 1997

Income Tax Assessment Act 1997

PAYG

pay as you go

TAA 1953

Taxation Administration Act 1953

TFNs

tax file numbers



The Education Tax Refund

This Bill amends the Income Tax Assessment Act 1997 by introducing a 50 per cent refundable tax offset for eligible education expenses (the Education Tax Refund) up to a maximum of $750 for children undertaking primary studies and $1,500 for children undertaking secondary studies.

Date of effect The Education Tax Refund applies to eligible expenses incurred from 1 July 2008.

Proposal announced This measure was announced by the Government in its election document A Tax Plan for Australia’s Future on 18 October 2007.  Further policy details were provided in the Treasurer’s Media Release No. 039 of 13 May 2008 released jointly with the Minister for Education. 

Financial impact This measure will cost:

2008-09

2009-10

2010-11

2011-12

$1,015m

$1,095m

$1,135m

$1,165m

Compliance cost impact Low.



C hapter 1     

The Education Tax Refund

Outline of chapter

1.1                   This Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) by introducing a 50 per cent refundable tax offset on eligible educational expenses. 

1.2                   Eligible taxpayers can claim up to $750 of eligible expenses for each child undertaking primary school studies (ie, a tax offset of up to $375 per child, per year) and $1,500 for each child undertaking secondary school studies (ie, a tax offset of up to $750 per child, per year).

1.3                   All references to legislative provisions in this chapter are references to the ITAA 1997 unless otherwise stated.

Context of amendments

1.4                   In the 2007 election document A Tax Plan for Australia’s Future, the Government announced a 50 per cent tax offset for eligible education expenses.  Further policy details were provided in the Treasurer’s Media Release No. 039 of 13 May 2008, released jointly with the Minister for Education.

1.5                   The object of the Education Tax Refund is to assist families with the cost of certain education expenses such as for the purchase of a home computer, home Internet connection, school textbooks and stationary items.

Summary of new law

1.6                   The amendments to the ITAA 1997 will provide individuals with a 50 per cent tax offset of eligible educational expenses made during an income year.  The tax offset applies up to:

•        $750 of eligible expenses for each child undertaking a recognised course of primary school studies (ie, an offset of up to $375 per child, per income year); and

•        $1,500 of eligible expenses for each child undertaking a recognised course of secondary school studies (ie, an offset of up to $750 per child, per year).

1.7                   The offset is a refundable tax offset, which means that any part of the offset that cannot be used to reduce tax liability is paid out to the taxpayer.

Comparison of key features of new law and current law

New law

Current law

Taxpayers who are entitled to Family Tax Benefit (FTB) Part A for an income year are eligible to receive a 50 per cent tax offset on eligible education expenses in respect of each child.

Taxpayers whose child would be an FTB child but for the fact that they or the child are receiving certain payments such as the Youth Allowance or the Disability Support Pension are also eligible for the tax offset in respect of the child.

Students in receipt of certain payments such as the Youth Allowance and the Disability Support Pension, and who satisfy an independence requirement that is relevant to the amount of the payment they receive are also eligible for the tax offset for their own education expenses.

No equivalent.

The maximum amount of expenses that can be claimed is $750 for each child undertaking primary school studies (ie, an offset of up to $375 per child) and $1,500 for each child undertaking secondary school studies (ie, an offset of up to $750 per child).

No equivalent.

Detailed explanation of new law

1.8                   This Bill amends the ITAA 1997 to allow taxpayers to claim a 50 per cent tax offset for eligible educational expenses.  They can claim up to $750 of eligible expenses for each child undertaking primary school studies (ie, an offset of up to $375 per child, per year) and $1,500 for each child undertaking secondary school studies (ie, an offset of up to $750 per child, per year).  [Schedule 1, item 3, Subdivision 61-M]

Entitlement to the Education Tax Refund

1.9                   Taxpayers are entitled to the education expenses tax offset on a certain day if:

•        on that day:

-       the taxpayer (including an approved care organisation) is entitled to an FTB Part A payment for a child;

-       the taxpayer and/or their child, or another person on the child’s behalf, are in receipt of certain other prescribed payments (listed in paragraph 1.11) for the child that would otherwise preclude them from receiving FTB Part A payments for that child; or

-       the taxpayer (the student) is entitled to certain prescribed payments and is assessed as independent for the purposes of the payment; and

•        the taxpayer’s child, or the student is enrolled or registered in a primary or secondary school course during any day in the same half-year as the day occurs and attends their course at least one day in that half year; and

•        the taxpayer, on behalf of their child, or the student, on their own behalf, incurs an eligible education expense on that day.

[Schedule 1, item 3, section 61-610]  

Eligibility for Family Tax Benefit Part A or certain prescribed payments

1.10               To be eligible to claim the tax offset in respect of a child, a taxpayer must be entitled to receive an FTB Part A payment for a child who is undertaking primary or secondary school studies.   [Schedule 1, item 3, subsection 61-620(1)]

1.11               A taxpayer may also be eligible for the tax offset if their child, or they or another person on the child’s behalf, are receiving certain payments or allowances under a prescribed educational scheme, a social security pension or benefit, or payments under a Labour Market Program for a child undertaking primary or secondary school studies, that precludes the individual from receiving an FTB Part A payment for that child.  [Schedule 1, item 3, subsection 61-620(2)]

Eligibility for an independent student

1.12               An independent student can claim the tax offset, in respect of their own educational expenses, on a day where they are:

•        receiving payments under a prescribed educational scheme (within the meaning of the Social Security Act 1991 ); or a social security pension or benefit (within the meaning of that Act); or payments under a program included in the programs known as Labour Market Programs; and they satisfy an independence requirement that is relevant to the amount of the payment [Schedule 1, item 3, subsection 61-610(2)] ;

•        undertaking full-time primary or secondary school studies;

•        under 25, an Australian resident or a special category visa holder, and residing in Australia; and

•        they incur an eligible education expense. 

1.13               However, a student is not entitled to the tax offset on a day that another individual or entity is entitled to the tax offset in respect of them. [Schedule 1, item 3, subsection 61-610(2)]

Eligibility for an approved care organisation

1.14               An approved care organisation is also eligible to claim the tax offset if it is entitled to receive FTB Part A payments for an individual (child) on a certain day and:

•        the child is enrolled or registered in a primary or secondary school course in the same six-month period and attends at least one day in that period; and

•        the organisation has incurred an eligible education expense for the child on that day.

[Schedule 1, item 3, subsection 61-620(3)]

An individual finishing full-time schooling

1.15               If the taxpayer’s child ceases full-time studies part way through a financial year, they will be eligible for the tax offset for the part of the year that their child meets the schooling requirement.  An individual is still eligible in the financial year that coincides with the child ceasing full-time schooling even if their child has an income that exceeds the child income test limit for an FTB child under item 2, paragraph (a) in the table in subsection 22A(1) of the A New Tax System (Family Assistance) Act 1999   (or for approved care organisations, paragraph (a) in item 2 in the table in subsection 35(1) of that Act).   [Schedule 1, item 3, subsection 61-620(4)]   

Example 1.1 :  An individual finishing full-time schooling

Sharon’s daughter Ashlee completed full-time secondary school studies in December and has secured work for the remainder of the financial year that would earn her an income that exceeds the child income test limit for her to be an FTB child.  Sharon incurred $2,000 in eligible expenses in the final half-year of Ashlee’s secondary school studies.  Even though Ashlee’s income for the year is over the child income test limit and she only meets the schooling requirement for half of the financial year, Sharon would still be entitled to claim the tax offset on $750 of her expenses leading to a refund of $375. 

Schooling requirement

1.16               A child or independent student satisfies the schooling requirement for the purposes of the tax offset, for each half year commencing 1 July or 1 January, if he or she:

•        is registered or enrolled:

-       in a primary or secondary school course within the meaning of the A New Tax System (Goods and Services Tax ) Act 1999 (this could include a primary or secondary course provided at an educational institution such as a TAFE);

-       with the education authority of the State or Territory in which the individual resides as a home schooled student; or

-       in a course of study or instruction determined by the Minister administering the Student Assistance Act 1973 to be a course to which the education expenses tax offset applies; and

•        attends the course of study or instruction, or received the home schooling, at least one day in a six-month period commencing from 1 July or 1 January.  

[Schedule 1, item 3, section 61-630]

1.17               The effect of the schooling requirement is that a child or student who enters or leaves school part way through the financial year, or for another reason only satisfies the criteria for one half of the financial year, will only be eligible for the offset for half of the financial year that they attended school.   [Schedule 1, item 3, section 61-630]  

Example 1.2 :  A child who commences primary school

Andrew started his first ever day of primary school in February 2009.  In January, his parents bought him stationery including crayons and paints, and other learning material he needed to start his schooling.  Andrew’s parents qualify for the schooling requirement from 1 January to 30 June 2009 as Andrew was enrolled at a school and attended at least one day in the six-month period.  Subject to satisfying the other eligibility requirements, Andrew’s parents will be able to claim half of the tax offset in their 2008-09 income tax return.  As Andrew did not attend school for the first half of the 2008-09 financial year — 1 July to 30 December 2008 — he does not satisfy the schooling requirement and thus they will not be able to claim the offset in respect of this period.

Example 1.3 :  A child who transitions from primary to high school

Tony commences year 7 at a New South Wales high school in February 2009.  Tony’s parents purchase a computer for him in March 2009.   As Tony also attended year 6 at primary school the year before he commenced year 7, he satisfies the schooling requirement for the whole of the 2008-09 income tax year from 1 July 2008 to 30 June 2009.  Therefore, subject to his parents satisfying the other eligibility requirements, Tony’s parents will be able to claim the full amount of the tax offset in their 2008-09 income tax return.

In addition, as Tony transitioned from primary school to high school during the 2008-09 financial year, his parents are eligible for the amount of offset for a high school student of up to $750 (see paragraph 1.34 for more information about this rule).

Example 1.4 :  A student who ceases full-time schooling in Australia

Mark is 22 and independently completing his secondary schooling.  Mark has a part-time job and receives Youth Allowance.  From 1 July 2008 to December 2008 Mark completed year 11.  Mark is assessed as an independent student for the purposes of the tax offset and in August 2008 he purchases a computer at a cost of $1,500 for his studies.  In February 2009, Mark goes on a six-month overseas school exchange program.  In this circumstance, Mark could only claim half of the offset for his educational expenses (ie, $750 of eligible expenses leading to an offset of $375) as he was not resident in Australia in the second half of the financial year and did not attend schooling in Australia in the six-month period commencing from 1 January 2009.

Eligible education expenses

1.18               An eligible education expense is one that is incurred by a taxpayer, or their partner, and the taxpayer is entitled to FTB Part A payments or other prescribed payments for a child.  An eligible expense is also one that is incurred by a student who is eligible for a payment listed in paragraph 1.12.  In addition, the expense must relate to the education of the child or the student, be of a kind specified in the legislation and have been incurred on a day when the child (or student) satisfied the schooling requirement.  For the purposes of this legislation ‘partner’ has the meaning as defined under the Social Security Act 1991.  [Schedule 1, item 3, subsection 61-640(1)]

1.19               Eligible expenses are items that support a child’s schooling and education covering the purchase, lease, hire or hire-purchase costs of:

•        laptops, home computers and associated costs (eg, this could include a number of computer components purchased to build a home computer);

•        computer-related equipment such as printers; and disability aids to assist the use of computer equipment for students with disabilities;

•        home Internet connection;

•        computer software (such as word processing, spreadsheet, database and presentation software and educational games; and Internet filters and antivirus software);

•        school textbooks and other paper-based school learning material (including prescribed textbooks, associated learning materials, study guides and stationery); and

•        tools of trade (as prescribed by the course).

[Schedule 1, item 3, subsection 61-640(4)]

1.20               Eligible expenses also include repair and running costs of computers and computer-related equipment including printers and disability aids.

1.21               The costs of establishing and maintaining a home Internet connection are also eligible expenses.

1.22               Expenses that are not eligible expenses for the purposes of the tax offset include:

•        school fees;

•        school uniform expenses;

•        student attendance at school-based extra-curricular activities such as excursions;

•        tutoring costs;

•        game consoles; and

•        school subject levies (eg, payment for consumables for particular subjects such as woodwork, art or home science).

1.23               The tax offset may not be claimed for an education expense to the extent that the expense is tax deductible or subject to another tax offset.  [Schedule 1, item 3, paragraphs 61-640(2)(a) and (b)]

1.24               An education expense is also not covered for an individual by the tax offset to the extent that they receive or are entitled to receive payment or property as reimbursement or payment for the expense under a Commonwealth Government benefit, grant or subsidy, or a benefit, grant or subsidy prescribed in the regulations to this legislation.   [Schedule 1, item 3, paragraphs 61-640(2)(c) and 61-640(3)(a)]

1.25               In addition the regulations to this legislation may prescribe that an expense of a particular kind is not an eligible education expense for the purposes of the tax offset.   [Schedule 1, item 3, paragraph 61-640(3)(b)]

Example 1.5 :  Amount of eligible expenses where a grant is received

Johnny is enrolled in a carpentry apprenticeship as part of his secondary school curriculum and purchased trade tools during the year worth $2,000.  As Johnny is enrolled in an apprenticeship, he is eligible for a Commonwealth grant of $800 to assist with the purchase of trade tools.  As Johnny has received a grant worth $800 towards the purchase of his trade tools, he is only eligible to claim the tax offset for the balance of that expenditure — that is, $1,200.

Pooling of expenses

1.26               Where expenses have been incurred by a taxpayer for more than one eligible child, the expenses can be added together and divided between the children when accessing the tax offset [Schedule 1, item 3, paragraph 61-660(1)(a)] .  However, this is provided that all children involved would have access to the purchased item and the item or items were purchased on a day when the taxpayer satisfied the eligibility requirements for the offset for each child.

Example 1.6 :  Pooling of education expenses in a family

Bruce and Joan have twins in secondary school.  Bruce purchases a computer worth $3,000 to which both children have access.  Bruce is able to divide the expense of the computer between the twins and has $1,500 in eligible expenses for each child.  Therefore, Bruce would be entitled to a total tax offset for his children of $1,500 (ie, double the secondary school maximum offset amount of $750 per child).

Amount of the education expenses tax offset that is claimable

1.27               The amount of tax offset that may be claimed in an income year is the amount (rounded up to the nearest whole dollar) that is the lesser of either:

•        one half of the sum of all the eligible expenses incurred for the current income year and any excess education expenses incurred in the income year immediately before the current year; and

•        the offset limit calculated for the taxpayer in the income year.

[Schedule 1, item 3, subsection 61-650(1)]

1.28               Education expenses in excess of the taxpayer’s offset limit for a financial year (as calculated in paragraph 1.34) can be carried over to the following financial year.  Excess expenses that are not claimed in the subsequent income year automatically lapse.   [Schedule 1, item 3, section 61-680]

1.29               The excess is worked out by comparing half of the taxpayer’s education expenses to their tax offset limit.  Any amount in excess of the offset limit is then doubled to restore the expenses to their original value.  This expense amount can be used in the following year when claiming the tax offset.  [Schedule 1, item 3, subsection 61-680(2)]

Example 1.7 :  Excess education expenses

Greg is in year 10.  His parents purchased a computer, a printer and a maths and language software program for Greg’s study totalling $1,800.  This amount is then halved ($900) to work out whether they have excess expenses for the current year.  As half the amount of their expenses is greater than their offset limit of $750 (for a high school student), Greg’s parents are entitled to a tax offset of $750 (attributable to $1,500 worth of expenses) in the current year in which the expenses are incurred.  The excess of $150 is then doubled to restore the original value of the expenses and may then be claimed as an eligible expense next financial year.  That is, they may put this expense towards their expenses incurred in the following income year for the purposes of claiming the tax offset in that financial year — assuming that Greg’s parents continue to be eligible for the tax offset.

Apportioning expenses in shared-care arrangements

1.30               Where a taxpayer and their partner are both eligible for FTB Part A and thus are both eligible for the education expenses tax offset, the taxpayer must apportion their expenses between each member of the couple when working out their total expenses, so as to avoid double counting.   [Schedule 1, item 3, subsection 61-650(2)]

1.31               Members of a couple (within the meaning of the Social Security Act 1991 ) who are both entitled to FTB Part A for a child on a particular day, would need to apportion all of their eligible expenses incurred on that day (in the same way as their FTB Part A is apportioned), for the purpose of calculating their expenses for the tax offset.  They would therefore need to take into account any determination made under section 28 or 29 of the A New Tax System (Family Assistance) Act 1999 of their percentage of FTB, and of their partner’s percentage of FTB, for the child for a period that includes the day the expense was incurred.  [Schedule 1, item 3, subsection 61-650(2)] 

1.32               Members of a couple who are both entitled to, or are receiving certain payments (listed in paragraph 1.11), that preclude the child from being their FTB child on a particular day also need to apportion their expenses for that day between each member of the couple. 

•        Unless a written agreement has been made nominating that one member of the couple can claim the tax offset in respect of the child or children for the period including that particular day, each member of the couple must only include half of each expense incurred by each member of the couple when calculating their expenses for that day.  Where a written agreement exists the nominated member can claim the whole of each expense incurred by each member of the couple for the period.

[Schedule 1, item 3, subsection 61-650(3)]

1.33               Members of a couple, who care for a child who ceases full-time schooling part way through a financial year and who would be their FTB child but for the fact that the child had income in excess of the child income test limit (as in paragraph 1.15), would also need to apportion their expenses as described in paragraph 1.32.  [Schedule 1, item 3, subsection 61-650(3)]

Calculating a taxpayer’s offset limit for the Education Tax Refund

1.34               The amount of the tax offset that can be claimed in respect of a child or an independent student is calculated using the following four steps:

•        Step 1 — Start with either $750 for a child or student who satisfies the schooling requirement for a secondary student on a day in the current year or $375 for an individual who satisfies the schooling requirement for a primary school student on a day in the current year.

-       Where an individual transitions from primary to secondary school studies during a financial year the $750 starting amount applies to them.

•        Step 2 — Then add up the days in the current year on which:

-       the taxpayer satisfies the criteria for entitlement to the tax offset as mentioned in paragraph 1.9.

•        Note, some modifications apply to step 2 if the taxpayer has a shared-care determination or similar arrangement for the child and these are described in paragraphs 1.37 to 1.44.

•        Step 3 — Then divide the result from step 2 by the number of days in the current year and round the result to two decimal places (rounding up if the third decimal place is five or more).

•        Step 4 — Lastly, multiply the result from step 1 by the result from step 3 and round the result up to the nearest whole dollar.

[Schedule 1, item 3, subsection 61-660(1)]

1.35               If the taxpayer has a number of children, these steps are repeated for each child.  The sum of the amounts worked out using the four steps is the offset limit for the taxpayer.   [Schedule 1, item 3, subsection 61-660(1)]

Example 1.8 :  Calculating a taxpayer’s offset limit

Ann is separated and at the start of the income year has 100 per cent care of her child, Donna, who is in full-time secondary schooling.  On 1 January the care arrangements change so that Matthew has 100 per cent care of Donna.

Ann works out the offset limit for Donna by starting with $750 (step 1).

Under step 2, Ann adds up the days in the year from 1 July to 31 December, and under step 3 divides the result by the number of days in the current year (184/365).  The result is rounded to 0.50.

Under step 4, the starting amount of $750 is multiplied by the result from step 3.  The result is $375 ($750  Ã—  0.50).

If Ann can claim the offset for other children as well, this process is followed for each child and the step 4 amounts are added together to get Ann’s offset limit.

1.36               The amounts listed in step 1 ($750 for secondary studies students and $375 for primary studies students) are indexed annually to the consumer price index using the method usually used in the income tax law, which is set out in Subdivision 960-M of the ITAA 1997.  [Schedule 1, item 3, subsection 61-660(2)]

Shared care

1.37               Where a couple has a shared-care arrangement over a child, each individual is only entitled to the portion of the offset amount attributable to their percentage of FTB or their shared-care percentage if they are entitled to FTB Part A, or a percentage under a similar arrangement if they are entitled to another payment.   [Schedule 1, item 3, section 61-670]

Modification to step 2 for shared-care determinations

1.38               If you are entitled to FTB Part A on a particular day and a determination has been made under section 28 or 29 of the A New Tax System (Family Assistance) Act 1999 of your percentage of the FTB for the child for the period that includes that day and step 2 applies to that day, only a portion of that day corresponding to that percentage may be counted for the purposes of step 2.   [Schedule 1, item 3, subsection 61-670(2)]

1.39               If you are entitled to FTB Part A on a particular day and you have a shared-care percentage under section 59 of the A New Tax System (Family Assistance) Act 1999 for the child for a period that includes that day and step 2 (as affected by the modification in paragraph 1.38) applies to that day, only a portion of that day ( or only a portion of the portion referred to in paragraph 1.38 ) corresponding to the shared-care percentage may be counted for the purposes of step 2.   [Schedule 1, item 3, subsection 61-670(3)]

Example 1.9 :  Modification to the offset limit calculation for shared-care determinations

A blended family consists of Robert and Rebecca and two children, Sandy and Luke.  Sandy is a child of a previous relationship of Robert, and Luke is in the care of the family for only some of the time.

A determination under section 28 of the A New Tax System (Family Assistance) Act 1999 covers the whole of the income year and gives Robert a percentage of 70 per cent of the FTB for the children and Rebecca a percentage of 30 per cent.  Section 59 of that Act also covers both Robert and Rebecca for the whole of the income year and gives each a percentage of 35 per cent of the FTB for Luke.

Robert works out his offset limit as follows.

For Sandy who is in full-time secondary schooling throughout the income year, the result of step 1 of the method statement in accordance with subsection 61-660(1) is $750.

Under step 2 and subsection 61-670(2), Robert counts a portion of each day in the income year that corresponds to the percentage of FTB he is entitled to for Sandy on that day. That is, 70 per cent (the section 28 percentage).  This is equivalent to 255.5 days out of 365 days in the income year.  Under step 3 Robert divides the amount of 255.5 days by the number of days in the current year, which is 365 days.  The result is 0.70.  This amount is multiplied by $750 (the result from step 1 for Sandy).  The overall result is that Robert’s offset limit for Sandy is $525.

Next, for Luke who is in full-time primary schooling throughout the income year, the result of step 1 of the method statement is $375.

Under step 2 and subsections 61-670(2) and (3), Robert again counts a portion of each day in the income year that corresponds to the percentage of FTB he is entitled to for Luke on that day. That is, 70 per cent (the section 28 percentage), multiplied by 35 per cent (the section 59 percentage).  The result is 24.5 per cent.  This is equivalent to 89.425 days out of 365 days in the income year.  Under step 3 Robert divides the amount of 89.425 days by the number of days in the current year, which is 365 days.  The result is rounded to 0.25.  This amount is multiplied by $375 (the result from step 1 for Luke). The overall result is that Robert’s offset limit for Luke is rounded to $94.

Robert sums the result of applying the method statement for each child ($525  +  $94) to get his offset limit for the income year ($619).

Rebecca works out her offset limit in the same way.  For Sandy, Rebecca works out $225 under the method statement ($750  Ã—  0.30). For Luke, Rebecca works out $40 ($375  Ã—  0.11). The offset limit for Rebecca is $267 ($225  +  $42).

Modification to step 2 for members of a couple

1.40               Specific conditions (outlined in paragraph 1.41) will modify step 2 of the basic method if:

•        a taxpayer, on a particular day, is a ‘member of a couple’ (within the meaning of the Social Security Act 1991 ) and both the individual and their partner are entitled to the tax offset because they care for one or more children and they, or the child, is in receipt of certain payments that preclude the child from being an FTB child.  These payments include prescribed educational scheme payments, a social security benefit or pension, or a payment under a program included in the programs known as Labour Market Programs; or

•        a taxpayer is a ‘member of a couple’ on a particular day and on that day the individual and their partner has one or more children who ceased full-time schooling and the child would have been their FTB child but for the fact that the child has an income for the year above the child income test limit as described in paragraph 1.15.

[Schedule 1, item 3, subsection 61-670(4)]

1.41               These conditions are:

•        if the individual and their partner have made a written agreement nominating one of them as the member who can claim the tax offset in respect of one or more children then the nominated member may, subject to the modification described in paragraph 1.44, count the whole of each day in the period for each such individual; and the other member must not count any days in the period for each such individual [Schedule 1, item 3, paragraph 61-670(4)(d)] ; or

•        if no written agreement nominating one of the members of the couple as the member who can claim the tax offset for one or more children for that period then each member may only count half of each day in the period subject to modifications described in paragraph 1.44 [Schedule 1, item 3, paragraph 61-670(4)(e)] .  

Modifications for individuals not members of a couple

1.42               An individual who, on a particular day they and one or more other individuals (other than their partner (within the meaning of the Social Security Act 1991 )) is entitled to the tax offset because they care for a child and they or the child is in receipt of certain payments that preclude the child from being an FTB child needs to consider certain other conditions when calculating step 2 (specified in paragraph 1.44). [Schedule 1, item 3, subsections 61-670(5) and (6)] 

1.43               Similarly, where a child ceased full-time schooling and has an income for the year above the child income test limit (described in paragraph 1.15), certain conditions would need to be considered when calculating step 2 (below), where the claimant also shares the care of the child with one or more individuals (other than their partner).   [Schedule   1, item 3, subsections 61-670(5) and (6)]   

1.44               These conditions mean that the individual may only count a portion of the day (or a portion of the portion worked out in paragraph 1.41 for that child) that is reasonable having regard to the extent to which the child was in their care on a day and the living arrangements of the child.  The individual must also have regard to preventing double counting in distributing the tax offset between themselves and others who share the care of the child.   [Schedule 1, item 3, subsections 61-670(5) and (6)]   

Application and transitional provisions

1.45               The amendments made by this Bill apply to assessments for the 2008-09 income year and later years.   [Schedule 1, item 10]

Consequential amendments

Amendments to the Income Tax Assessment Act 1997

1.46               Section 13-1 of the ITAA 1997 is a non-operative index of tax offsets.  This section is amended to include a reference to the education expenses tax offset.  [Schedule 1, item 2, section 13-1]

1.47               Section 67-25 of the ITAA 1997, is the operative provision that identifies which tax offsets are subject to the refundable tax offset rules.  It is amended to include the education expenses tax offset.   [Schedule 1, item 4, section 67-25]   

1.48               Section 960-265 of the ITAA 1997 is a non-operative index of amounts that are subject to indexation.  It is amended to include a reference to the education expenses tax offset limits.   [Schedule 1, item 5, section 960-265]

Amendments to the Taxation Administration Act 1953

1.49               This Bill also amends sections 45-340 and 45-375 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953), which deal with pay as you go (PAYG) instalments.  The amendments ensure that a person’s entitlement to the tax offset is not taken into account in calculating PAYG instalments.  To achieve this, the tax offset will be disregarded in determining the ‘adjusted tax’ on ‘adjusted taxable income’ or on ‘adjusted withholding income’, and it will be disregarded in determining the ‘adjusted assessed tax’ on ‘adjusted assessed taxable income’. [Schedule 1, items 8 and 9, sections 45-340 and 45-375 of Schedule 1 to the TAA 1953]

1.50               This amendment is made because it cannot reasonably be assumed that a taxpayer who receives a certain amount of the tax offset in one-year will have the same entitlement to the tax offset in the next year.  PAYG instalment calculations or variations which take the offset amount from an earlier year into account would not necessarily be an accurate reflection of tax liability for the current year and might result in an over- or an under-payment of instalments.

Amendments to the A New Tax System (Family Assistance) (Administration) Act 1999

1.51               The Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA Secretary) may provide the Commissioner of Taxation (Commissioner) with relevant information about people, including their tax file numbers (TFNs), which has been acquired by an officer under the family assistance law and which is relevant to the administration of the education expenses tax offset.  The information (including TFNs) given to the Commissioner may only be used for purposes relating to the education expenses tax offset.   [Schedule 1, item 1, section 169B of the A New Tax System (Family Assistance) (Administration) Act 1999]

1.52               This amendment does not limit the powers of the FaHCSIA Secretary to disclose information under section 168 of the A New Tax System (Family Assistance) (Administration) Act 1999 .  [Schedule 1, item 1, subsection 169B(3) of the A New Tax System (Family Assistance) (Administration) Act 1999]

1.53               Section 164 of the A New Tax System (Family Assistance) (Administration) Act 1999 prohibits the unauthorised use of protected information.  The inclusion of section 169B authorises the FaHCSIA Secretary to provide relevant information for the purposes of the administration of the education expenses tax offset.

Amendments to the Social Security (Administration) Act 1999

1.54               The FaHCSIA Secretary and the Secretary of the Department of Education, Employment and Workplace Relations ( DEEWR Secretary ) may provide the Commissioner with relevant information about people, including their TFNs, which has been acquired by an officer under the social security law and which is relevant to the administration of the education expenses tax offset.  The information (including TFNs) given to the Commissioner may only be used for purposes relating to the education expenses tax offset.   [Schedule 1, item 6, section 208A of the Social Security (Administration) Act 1999]

1.55               This amendment does not limit the powers of the FaHCSIA Secretary and the DEEWR Secretary to disclose information under section 208 of the Social Security (Administration) Act 1999 [Schedule 1, item 6, subsection 208A(3) of the Social Security (Administration) Act 1999]

1.56               Section 204 of the Social Security (Administration) Act 1999 prohibits the unauthorised use of protected information.  The inclusion of section 208A authorises the FaHCSIA Secretary and the DEEWR Secretary to provide relevant information for the purposes of the administration of the education expenses tax offset. 

Amendments to the Student Assistance Act 1973

1.57               The DEEWR Secretary may provide the Commissioner with relevant information about people, including their TFNs, which has been acquired by an officer under the Student Assistance Act 1973 and which is relevant to the administration of the education expenses tax offset.  The information (including TFNs) given to the Commissioner may only be used for purposes relating to the education expenses tax offset.   [Schedule 1, item 7, section 356A of the Student Assistance Act 1973]

1.58               This amendment does not limit the powers of the DEEWR Secretary to disclose information under section 355 of the Student Assistance Act 1973 [Schedule 1, item 7, subsection 356A(3) of the Student Assistance Act 1973]

1.59               Section 353 of the Student Assistance Act 1973 prohibits the unauthorised use of protected information.  The inclusion of section 356A authorises the DEEWR Secretary to provide relevant information for the purposes of the administration of the education expenses tax offset. 

 



Schedule 1:  Education expenses tax offset

Bill reference

Paragraph number

Item 1, section 169B of the A New Tax System (Family Assistance) (Administration) Act 1999

1.51

Item 1, subsection 169B(3) of the A New Tax System (Family Assistance) (Administration) Act 1999

1.52

Item 2, section 13-1

1.46

Item 3, Subdivision 61-M

1.8

Item 3, section 61-610

1.9

Item 3, subsection 61-610(2)

1.12, 1.13

Item 3, subsection 61-620(1)

1.10

Item 3, subsection 61-620(2)

1.11,

Item 3, subsection 61-620(3)

1.14

Item 3, subsection 61-620(4)

1.15

Item 3, section 61-630

1.16, 1.17

Item 3, subsection 61-640(1)

1.18

Item 3, paragraphs 61-640(2)(a) and (b)

1.23

Item 3, paragraphs 61-640(2)(c) and 61-640(3)(a)

1.24

Item 3, paragraph 61-640(3)(b)

1.25

Item 3, subsection 61-640(4)

1.19

Item 3,  subsection 61-650(1)

1.27

Item 3, subsection 61-650(2)

1.30, 1.31

Item 3, subsection 61-650(3)

1.31, 1.33

Item 3, subsection 61-660(1)

1.34, 1.35

Item 3, paragraph 61-660(1)(a)

1.26

Item 3, subsection 61-660(2)

1.36

Item 3, section 61-670

1.37

Item 3, subsection 61-670(2)

1.38

Item 3, subsection 61-670(3)

1.39

Item 3, subsection 61-670(4)

1.40

Item 3, paragraph 61-670(4)(d)

1.41

Item 3, paragraph 61-670(4)(e)

1.41

Item 3, subsections 61-670(5) and (6)

1.42, 1.43, 1.44

Item 3, section 61-680

1.28

Item 3, subsection 61-680(2)

1.29

Item 4, section 67-25

1.47

Item 5, section 960-265

1.48

Item 6, section 208A of the Social Security (Administration) Act 1999

1.54

Item 6, subsection 208A(3) of the Social Security (Administration) Act 1999

1.55

Item 7, section 356A of the Student Assistance Act 1973

1.57

Item 7, subsection 356A(3) of the Student Assistance Act 1973

1.58

Items 8 and 9, sections 45-340 and 45-375 of Schedule 1 to the TAA 1953

1.49

Item 10

1.45