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Youth Allowance - Deductions available

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Julia

Julia

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I just heard the end of an item on ABC Local Radio (Steve Austin Evenings in Qld) where he said there has been a legal test cast with the ATO in which someone on Youth Allowance has succeeded in claiming as a deduction all text books and any other expenses associated with their education.

I know we have a number of ASF members who are studying and receiving the meagre Youth Allowance, so it might be worth looking into.

Sorry not to have a link to the programme. The ABC Local Radio website is a complete nightmare - tried for 15 minutes to find a phone number to the programme in the hope of getting a link to the item, but have failed.
 
There are so many lounge room accountants around.
Im going to be out of a job soon, it seems every clients mother in laws sisters brother has been advising them of what deductions they can get too.

Anyway lets clear this one up quickly

People on youth allowance don't pay tax. (in the case that they do pay tax, they will receive the low income earners tax offset which menas they'll get all their tax back anyway)

Deductions reduce your taxable income.

You cannot get more tax back than you paid.

You do the maths :eek:

Brad
 
Thanks Brad. If I'd thought about it a bit, I'd have realised that.
Sorry for posting something so thoughtlessly.
 
Julia said:
Thanks Brad. If I'd thought about it a bit, I'd have realised that.
Sorry for posting something so thoughtlessly.
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Wasn't aimed at you personally Julia :(
Was in a bit of a rush with other stuff, sorry if my post came off blunty
(I could also be wrong too :) )

Brad
 
Its a true story, she earnt some other money from part time work and then when the allowance was added to it, it impacted upon tax etc, have a search online and you will find it. She did win
 
kotim said:
Its a true story, she earnt some other money from part time work and then when the allowance was added to it, it impacted upon tax etc, have a search online and you will find it. She did win
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She must have earnt quite alot of money

You get $6000 tax free

$750 tax offset for low income earners

Therefore she has to earn $6000+($750/0.15) = $11,000

This would mean she would have $750.15 tax payable on $11,001, reducing her tax refund by $750.15-$750 = 0.15

No idea how much income you can earn before you lose the youth allowance though but i'd assume it's not much more than $5000?

Remember; you don't get the cost of a deduction as a refund. the only effect it has is lowering your taxable income by the amount of the deduction. Therefore in reality you only get the tax back that was paid on the deduction. In her case 15%

The line between actually getting youth allowance with a high income and it actually being worth making a claim on such a tiny amount would be very small and a rare occasion

Though it would be nice if this thread helped more people get more money back off the Government ;)

Brad
 
So it would be a case of considering how much income was lost via the means test ?

The YA personal income test allows full-time students to have income of $236 per fortnight ($62 per fortnight for other young people) before payments are reduced. The first $80 of income over these income free areas reduces fortnightly income by 50 cents in the dollar. Any income beyond this reduces fortnightly allowance by 70 cents in the dollar. A partner income test also applies.

A personal assets test applies to independent YA recipients unless their partner receives income support. Assets of dependent allowees are included in the family assets test.
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Income Bank
Full-time students/trainees have access to the student income bank, which allows them to keep more of their Youth Allowance where they earn income over short periods like vacation employment. Any unused part of their fortnightly income free area of $236 per fortnight is accumulated in the income bank, up to a maximum of $6,000. The student income bank balance is then used to offset the effect of casual earnings over the income free area.
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Yep its true our tax specialist at work notified us about this one today as well, below are the facts from the case:

There was no dispute about the facts. During the tax year, the applicant was enrolled as a full-time student undertaking a teaching degree at the Australian Catholic University. In her tax return for the tax year, she acknowledged having received $14,946 as wages earned as a party-time sales assistant in the retail chain Katies, as well as the receipt of income from Youth Allowance in the sum of $3,622. The applicant did not declare the receipt of any income from having worked as a teacher.
It was common ground that the applicant was entitled to deduct from her income costs incurred in the course of her job as a sales assistant. The question in issue is whether she was also entitled, as a recipient of Youth Allowance, to deduct from her income the costs incurred in the course of her study.
In her tax return for the tax year, the applicant claimed a deduction of $920 for work-related self-education expenses, comprising;
‘Travel expenses other than to university $59.00
Supplies for children during teacher rounds $75.00
Student Administration Fee $80.00
Depreciation – computer $692.00
Textbooks and stationery $264.00
$1,170.00
Less reduction s 82A(1) $250
$920.00’

The full case can be viewed here http://www.austlii.edu.au/au/cases/cth/FCA/2009/286.html
 
This is not really a youth allowance story per se is it ? more about the ability to obtain a tax deduction for expenses not related to your work or income.

eg I am into phoptogrpahy but am not a professional photographer, so I can't claim my cameras/lenses as expenses against my normal "job" ie semi retired lay-about.

The way I read this (and it surprises the hell out of me) is that it would appear though that if I was studying an Arts course at Uni, (or photography at TAFE ?) with the intention of becoming a professional photographer (COUGH !), I should be able to claim the gear as a deduction against my other income... perhaps I should enrol, the cost of my gear alone in deductions would be worth $1000's :)

Remember she is not a teacher and is claiming expense involved in earning getting her teaching degree. I guess it's no more asinine then negative gearing on houses, where you offset the loss against your other income.

I am also guessing we shall shortly see a swift change in the tax law to close this loophole :)
 
Trevor_S said:
The way I read this (and it surprises the hell out of me) is that it would appear though that if I was studying an Arts course at Uni, (or photography at TAFE ?) with the intention of becoming a professional photographer (COUGH !), I should be able to claim the gear as a deduction against my other income... perhaps I should enrol, the cost of my gear alone in deductions would be worth $1000's :)

I am also guessing we shall shortly see a swift change in the tax law to close this loophole :)
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1. Your costs from HECS would far outweigh any potential gain IMO. Mostdegrees are between 4 and 8k per year.

2. I agree, a change in legislation will quickly close this loophole
 
prawn_86 said:
1. Your costs from HECS would far outweigh any potential gain IMO. Mostdegrees are between 4 and 8k per year.

2. I agree, a change in legislation will quickly close this loophole
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It seemed like the poster was an older person who is semi-retired
The HECS Limit is $40,000 so if you earn under that you don't have to pay

I guess its just a game of balancing scales

My degree is 8k per year :mad:
 
From my brief studies of tax at uni I "thought" it was pretty clear that a deduction for education was only allowed if it were to improve your current employment prospects. (e.g. add to your current qualifications.)

I wonder if this would also relate to people who have lost their job and are on Newstart. Centrelink requires you to apply for 10 jobs per fortnight along with all the other frustrations they put you through.

I can't think of any expenses now but would there be any expenses incurred that could build up over time?
 
Trevor_S said:
This is not really a youth allowance story per se is it ? more about the ability to obtain a tax deduction for expenses not related to your work or income.

eg I am into phoptogrpahy but am not a professional photographer, so I can't claim my cameras/lenses as expenses against my normal "job" ie semi retired lay-about.

The way I read this (and it surprises the hell out of me) is that it would appear though that if I was studying an Arts course at Uni, (or photography at TAFE ?) with the intention of becoming a professional photographer (COUGH !), I should be able to claim the gear as a deduction against my other income... perhaps I should enrol, the cost of my gear alone in deductions would be worth $1000's :)

Remember she is not a teacher and is claiming expense involved in earning getting her teaching degree. I guess it's no more asinine then negative gearing on houses, where you offset the loss against your other income.

I am also guessing we shall shortly see a swift change in the tax law to close this loophole :)
Click to expand...

No the deduction was against the youth allowance... the deduction was less then the youth allowance amount and as such really has nothing to do with negative gearing...

The significance here is that while her job was not related to her degree, the costs involved in her degree were required for her to be paid youth allowance.

The tax office had previously stated that no deductions were available against benefits/pensions... This overrules that and opens the door for people to claim costs associated with becoming egible for a benefit...
 
Kez180 said:
No the deduction was against the youth allowance...
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That's not how I read it,
to deduct from her income the costs incurred in the course of her study.
Click to expand...
however I am no tax lawyer.

Kez180 said:
the deduction was less then the youth allowance amount and as such really has nothing to do with negative gearing...
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Sorry, my point was subtle. She is deducting from her income, expenses incurred in another enterprise i.e like negative gearing on property where losses aren't quarantined.

Kez180 said:
The significance here is that while her job was not related to her degree, the costs involved in her degree were required for her to be paid youth allowance.

The tax office had previously stated that no deductions were available against benefits/pensions... This overrules that and opens the door for people to claim costs associated with becoming egible for a benefit...
Click to expand...

that's not how I read it....as I stated. To me it seems as though she wants to claim expenses incurred that are unrelated to her income (her job at Katies), normally not allowed at all. The ammo for the argument is that in order to get the youth allowance, she has to study and have those expenses, so that may be the caveat, she doesn't appear to be claiming it against the youth allowance per se ? I can't see why any student, regardless of youth allowance payments, can't try it on and why I suggested that loophole might be closed quickly. ie I enrol in TAFE course to study photography, with the intention of becoming a photographer "one day", I spend $15,000 on photography equipment and claim that against my unrelated day jobs income, which is essentially what she seems to be doing ? 'cause if she was on youth allowance only, she would not be paying any tax.
 
Kez180 and tommymac your both right. The deductions was allowed because of the youth allowance payment, not as a self-education expense. Thus enrolling in a HECS course would not get you a deduction. Furthermore even if someone was earning part-time income as a photographer the deduction would be limited to the amount of income directly earned from photography (assuming total income is under 20k).

I agree the loophole will be closed soon, otherwise every dole recipient with an internet connection will start claiming deductions.
 
I agree with Taltan et al, the deductions were against the Youth Allowance. Unless you received Youth Allowance, the deductions wouldnt be allowable.

And every Family A and B recipient could claim for costs associated with raising children! Far out!
 
Ok lets try to get an example for all us lesser informed out there:

Full time student.
Works Part time, earns 15k pa.
Qualifies for YA, and recieves it during periods of low work, assume payment of 5k pa.

Does this ruling mean student can deduct expenses like books, stationary, travel between work and university?

Layman type responses please
 
Yes. Is that layman enough? :p:

You must be studying to receive Youth Allowance, therefore, anything you have to spend in order to receive Youth Allowance, ie anything you spend in order to study (I wonder if that also includes HECS aka HELP) has, by this decision, now become tax deductible.
 
i can tell you one thing - ring the ATO about this, and its very much NO COMMENT. who you speak to either have no idea (about this or anything) or they are instructed to NOT COMMENT.

expect an appeal (the legal branch of the ATO love spending our tax money on such things) and/or another rewrite of tax laws to clear this ruling.
 
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