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January 2011 Newsletter

Personal Property Securities (PPS)
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Youth Allowance - Australian Taxation Office (ATO) Initiative

The ATO will shortly give eligible taxpayers a deduction of $550 during 2007, 2008, 2009 and 2010.

A previous article has described the court case of Anstis, a student who won her case for expenses necessarily incurred to obtain an Austudy allowance. The original article from 31-7-09 is copied below this new article.  

Whilst the ATO may have been unhappy at losing the case, the precedent at the highest court meant that many taxpayers were ready to lodge objections for previous years.

Instead, the ATO hope that by being proactive, affected taxpayers will be satisfied with the $550 deduction without any verification.

This is an arbitrary figure - if a taxpayer has incurred more, then an objection can still be lodged - subject to time limits.  Hence don't delay.

The ATO will send an explanation to affected clients, but if this letter is returned unclaimed, the deduction will not be allowed.  Any taxpayer using a tax agent will receive the letter direct, but the assessment and refund via the tax agent.

If you are affected and satisfied with the $550 as an average expenditure, then do nothing, but if you spent more than $550 then obtain the evidence straight away.  There are time limits and expect processing delays for later submissions.



Student entitled to deductions against Youth Allowance

Some commentators have been surprised by a decision to follow the logic of the meaning of "necessarily incurred", which is contrary to Australian Taxation Office (ATO) views.

The Federal Court has held that a student taxpayer who received Youth Allowance was entitled to a deduction for her expenditure in pursuing a teaching degree (on travel to and from teaching rounds, student administration fees, text books, etc), as these outgoings were incurred in the gaining of producing of her assessable income (being the Youth Allowance). 

Under the Social Security Act 1991, a recipient of Youth Allowance is required throughout the relevant period to undertake full-time study, which is satisfied if they:- 

  • are enrolled at an educational institution;
  • undertake at least three quarters of the normal amount of full-time study in respect of the relevant course; and
  • in the Secretary's opinion are making satisfactory progress towards completing the course.

The Court basically held that, since the taxpayer had to spend money to satisfy these requirements and receive the Youth Allowance, the outgoings were incurred in gaining or producing her assessable income.

We have argued this in the past, because we were of similar view as the Full Federal Court, but unable to afford to challenge the ATO.

Expect the ATO to submit that the case was decided on its facts (and therefore not have general application), but this decision could have wider application.