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Ruling

Subject: Education tax refund

Question

Does a sewing machine qualify as an eligible education expense for the purposes of the education tax refund (ETR)?

Answer: No.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

Your children are studying an elective subject at high school.

Your children require a sewing machine to complete the subject.

The subject does not involve attendance at TAFE.

Relevant legislative provisions

Income Tax Assessment Act 1997 Ch2-Pt2-20-Div61-SDiv61-M

Income Tax Assessment Act 1997 Section 61-640.

Reasons for decision

The ETR is a new government initiative to help with the cost of educating primary and secondary school children. It means eligible parents, carers, legal guardians and independent students may be entitled to a refundable tax offset equal to 50% of eligible education expenses up to a set limit: subdivision 61-M of the Income Tax Assessment Act 1997 (ITAA 1997).

For the purposes of the ETR eligible education expenses are items that support a child's schooling and education covering the purchase, lease, hire or hire-purchase cost of (section 61-640 of the ITAA 1997):

§ laptops, home computers and associated costs;

§ computer-related equipment such as printers, USB flash drives as well as disability aids to assist the use of computer equipment for students with special needs;

§ home internet connection, including the costs of establishing and maintaining;

§ computer software for educational use, word processing, spreadsheet, database and presentation software and internet filters and antivirus software;

§ school textbooks, other paper-based school learning materials including prescribed textbooks, associated learning materials, study guides and stationery; and

§ a tool of trade.

In your case, you are considering the purchase of a sewing machine for your children's elective subject. For the sewing machine to qualify as an eligible education expense it must satisfy the definition above. Therefore we must further consider what a tool of trade means for the purposes of the ETR.

What constitutes a 'tool of trade' is not defined within the provisions and would therefore largely take on its ordinary meaning: an instrument of manual operation (tool) commonly used in a specific occupation.

The definition, therefore, has two elements, the instrument (tool) and the occupation (trade), and it is considered both elements need to be present for the acquisition costs to be an eligible expense for ETR purposes. Thus the cost of tools as part of an elective subject such as woodwork would not necessarily qualify as an eligible expense. The tools would need to be acquired as part of a vocational training subject aimed at developing occupational/trade skills.

In your case, your children are not completing a course of vocational training; they are undertaking an elective subject at their high school. Therefore, the sewing machine is not considered to be an eligible education expense for the purposes of the ETR.