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Edited version of your private ruling

Authorisation Number: 1012346589966

Ruling

Subject: Fringe benefits tax - otherwise deductible rule and self-education

Question 1

Can your fringe benefits tax liability for the reimbursement provided to your employee for their self-education expenses, be reduced by applying the 'otherwise deductible' rule pursuant to section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes

This ruling applies for the following period:

A specified number of fringe benefits tax years from 1 April 2012

The scheme commences on:

In the fringe benefits tax year beginning 1 April 2012

Relevant facts and circumstances

You have a 'studies assistance' policy (the policy) whereby at your discretion, you can provide studies assistance to approved employees.

In order to qualify for assistance under the policy, employees must undertake relevant work related self-education which meets the self-education guidelines found in Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses incurred by an employee or a person in business (TR 98/9).

Under the policy you may provide financial assistance, by way of reimbursement, to approved employees for certain self-education expenses.

Under the policy, costs that can be reimbursed include student fees, administration costs, tuition fees, prescribed text books and contributions to the Higher Education Loan Programs HECS-HELP and FEE-HELP and Post Graduate Education Loans Scheme.

In order to be reimbursed, employees must provide you with receipts for payments made and proof of results showing successful completion of the course of study.

Under the policy, you will reimburse up to a maximum specified percentage of the costs incurred by the employee, up to a particular limit per unit per semester and up to a specified maximum amount per year.

Your employee undertook a course of study which you have stated satisfies the self-education guidelines in TR 98/9.

Your employee applied for and obtained a FEE-HELP loan for their tuition fees.

After completing the subjects and receiving their results, your employee made a payment to the Australian Taxation Office (ATO) towards his/her FEE-HELP loan to pay for the tuition fees (less the discount for voluntary repayments).

Your employee sought reimbursement for their payment as an approved student in line with your policy.

In order to be reimbursed the employee provided you with the following items of evidence:

You advised that you have reimbursed a portion of the tuition fees incurred and paid by the employee.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 section 20

Fringe Benefits Tax Assessment Act 1986 paragraph 20(b)

Fringe Benefits Tax Assessment Act 1986 section 24

Fringe Benefits Tax Assessment Act 1986 subsection 136(1)

Reasons for decision

Question 1

Can your fringe benefits tax liability for the reimbursement provided to your employee for their self education expenses, be reduced by applying the 'otherwise deductible' rule pursuant to section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

You have reimbursed your employee for expenses they incurred for self education.

Section 20 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) sets out the circumstances in which a reimbursement will be an expense payment benefit. Section 20 states:

Where a person (in this section referred to as the provider):

Where:

In summarising, the otherwise deductible rule as set out in section 24 of the FBTAA will apply to reduce the taxable value of an expense payment benefit if the following conditions are satisfied:

A 'once-only' deduction is defined in subsection 136(1) to mean:

Was an expense payment benefit provided to an employee?

As established above, you provided an expense payment benefit to your employee.

Would the employee who received the benefit have been entitled to a once-only deduction for the expense had you not reimbursed them for the expense incurred?

The deductibility of self-education expenses is discussed in TR 98/9.

General guidelines for determining the deductibility of self-education expenses are provided in paragraphs 12 to 17 of TR 98/9. At these paragraphs the ruling states:

You have stated that the course of study your employee undertook satisfies these general guidelines.

Your employee has incurred expenses for tuition fees which they initially funded with a FEE-HELP loan.

The deductibility of tuition fees and higher education loan repayments is specifically discussed at paragraphs 23 to 24 of TR 98/9 as follows:

Paragraph 85 then provides further detail on these general statements:

These general principles were discussed in regards to studies funded by FEE-HELP loans in ATO Interpretative Decision ATO ID 2005/26 Income Tax Deductions: self-education - course fees paid from FEE-HELP loan funds (ATO ID 2005/26) and, ATO Interpretative Decision ATO ID 2005/27 Income Tax Deductions: self education - payments made to reduce FEE-HELP debt (ATO ID 2005/27).

In ATOID 2005/26 a taxpayer was allowed a deduction under section 8-1 of the ITAA 1997 for university course fees paid where they obtained a FEE-HELP loan for the fees. In providing the reasoning for this decision ATO ID 2005/26 applies paragraphs 13-15 of TR 98/9 and states:

Comparatively ATO ID 2005/27 considers payments made to reduce a FEE-HELP debt, as opposed to the payment of course fees that were initially funded by a FEE-HELP loan. ATO ID 2005/27 confirms that the taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 in these circumstances. In providing the reasoning, ATOID 2005/27 states:

In considering the principles set out in TR 98/9 and applied in ATO ID 2005/26 and ATO ID 2005/27 the employee would have been entitled to claim a once only deduction for the course fees.

Conclusion

You have advised that you have reimbursed a portion of your employee's tuition fees.

Your policy states that you can reimburse an employee for tuition fees or contributions paid to the Higher Education Loan Programs (including FEE-HELP). Thus, as distinguished by ATO ID 2005/26 and ATO ID 2005/27, we consider that you have reimbursed your employee for tuition fees paid. It is accepted therefore, that the 'otherwise deductible' rule can be applied to reduce your FBT liability on the reimbursement of your employee's self education expense.


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