ATO Interpretative Decision

ATO ID 2005/27

Income Tax

Deductions: self education - payments made to reduce FEE-HELP debt
FOI status: may be released
Status of this decision: Decision Current
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for payments to reduce their full- fee paying student Higher Education Learning Programme (FEE-HELP) debt?

Decision

No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for payments to reduce their FEE-HELP debt.

Facts

The taxpayer received a loan under the terms of FEE-HELP contained in Part 3.3 of Chapter 3 of the Higher Education Support Act 2003 (HESA 2003) to pay their course (tuition) fees.

The taxpayer makes payments to reduce their FEE-HELP debt.

Reasons for Decision

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. However, a deduction will not be allowed where another provision of the ITAA 1997 specifically prevents it.

Paragraph 26-20(1)(cb) of the ITAA 1997 specifically prevents a deduction for payments made to reduce a debt to the Commonwealth under Chapter 4 of the HESA 2003. Chapter 4 of the HESA governs debts raised as a result of loans made under Chapter 3 of the HESA 2003, which includes FEE-HELP loans.

The taxpayer has made payments (either as voluntary payments or as part of their income tax assessment) to reduce their FEE-HELP debt. Paragraph 26-20(1)(cb) of the ITAA 1997 operates to deny the taxpayer a deduction for payments. Therefore the taxpayer cannot claim a deduction in respect of the FEE-HELP debt payments under section 8-1 of the ITAA 1997.

Note. This discussion is equally applicable where a taxpayer has obtained a HECS-HELP loan under Part 3.2 of Chapter 3 of the HESA 2003 or and OS-HELP loan under Part 3.4 of Chapter 3 of the HESA 2003 and makes payments to reduce their HECS-HELP or OS-HELP debts.

Date of decision:  7 January 2005

Year of income:  Year ended 30 June 2004

Legislative References:
Income Tax Assessment Act 1997
   section 8-1
   paragraph 26-20(1)(cb)

Higher Education Support Act 2003
   Chapter 3
   Chapter 4

Keywords
Education expenses
Self education expenses
Student loan debt

Siebel/TDMS Reference Number:  4330295

Business Line:  Small Business/Individual Taxpayers

Date of publication:  21 January 2005

ISSN: 1445-2782


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