Explanatory Memorandum
(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)Chapter 7 - Education expenses tax offset (uniforms)
Outline of chapter
7.1 Schedule 7 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) to include school uniforms in the range of eligible expenses for the education expenses tax offset from 1 July 2011.
Context of amendments
7.2 The education expenses tax offset provides eligible individuals with an offset against their income tax liability of up to 50 per cent on certain education expenses up to an indexed threshold.
7.3 Eligible expenses for the education expenses tax offset are defined in section 61-640 of the ITAA 1997.
Summary of new law
7.4 This Schedule provides an increase in the range of eligible expenses for the education expenses tax offset to include school uniforms.
7.5 School uniforms of primary and secondary school students who meet the schooling requirements set out in section 61-630 of the ITAA 1997 would be an eligible expense.
7.6 For clothing to be considered a school uniform it needs to be distinctive to, approved or recognised by the school. Whether an item is distinctive will depend on the item's design and colour, as well as the presence of other items which could identify the child as a part of the school.
7.7 Items that carry a school crest or emblem would generally meet these criteria, although the presence of an emblem or badge is not necessary for clothing to be part of a school uniform. Similarly, items that comply with a colour code determined by the school would generally meet the criteria.
Example 7.20
A public school has a policy which states that students should wear yellow shirts, blue hats, grey shorts or skirts and black leather shoes to identify the students as attending the school. However, while wearing these colours is strongly encouraged, it is not compulsory. An eligible individual whose child attends the school buys items which fit within this policy from a store unaffiliated with the school. None of the clothing items contain the name of the school or school crest.
As the items, including shoes, are approved or recognised as part of a distinctive school outfit and fall under the policy, they would be eligible expenses. This applies irrespective of where the clothing was purchased or the fact the uniform was not mandatory.
Example 7.21
A school has a dress code where students are required to be dressed in a neat and presentable fashion, but which does not indicate a more specific colour or style that the clothing should take. An eligible individual whose child attends the school buys clothes which they intend to wear to school.
The items would not be eligible expenses. While the clothing meets the school's dress code, they lack the sufficiently distinctive quality of a uniform, and could not identify the child as a student at the school.
7.8 Depending on the requirements of the school, a school uniform will typically be comprised of items such as summer and winter dresses or tunics, long and short sleeved shirts, and shorts or pants. Further items such as hats, jumpers, school blazers and coats, sock, shoes and other footwear would also be able to be claimed, where the items are distinctive, and approved or recognised by the school.
7.9 The inclusion of school uniforms as an eligible expense for the education expenses tax offset takes effect on 1 July 2011 for the 2011-12 and later income years.
Detailed explanation of new law
7.10 Item 1 adds school uniforms to the table of eligible expenses for the education expenses tax offset where the expense is incurred through a direct payment or hire, hire-purchase arrangement. [ Schedule 7, item 1 ]
Application and transitional provisions
7.11 Item 2 provides for expenses on eligible uniforms incurred on or after 1 July 2011 to be eligible for the education expenses tax offset. [ Schedule 7, item 2 ]