Edited version of private advice

Authorisation Number: 1012679509269

Ruling

Subject: Study support payment

Question 1

Will your study support payment received from your employer be included in your assessable income?

Answer

No

Question 2

Will your study support payment received from your employer reduce the total deduction available in regards to your tuition fees?

Answer

Yes

This ruling applies for the following period(s)

Income year ended 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

You received a study support payment from your employer to cover tuition fees for a course you are studying.

The course is likely to lead to an increase in income from your current work activities.

The study support was conditional on:

• you provided receipts to show that you had incurred the expenses related to the tuition fees

• you are obliged to continue your employment with the employer for a minimum of one year after you have graduated and will have to pay back the amount if you cease employment.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 51AH

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

Taxation Ruling TR 92/15 provides the Commissioner's view on the difference between an allowance and a reimbursement. At paragraph 2 the ruling adopts the follow definition of an allowance:

A payment is an allowance when a person is paid a definite predetermined amount to cover an estimated expense. It is paid regardless of whether the recipient incurs the expected expense. The recipient has the discretion whether or not to expend the allowance.

Further at paragraph 3 it defines a reimbursement as follows:

A payment is a reimbursement when the recipient is compensated exactly, whether wholly or partly, for an expense already incurred although not necessarily disbursed. In general, the provider considers the expense to be its own and the recipient incurs the expenditure on behalf of the provider. A requirement that the recipient vouch expenses lends weight to a presumption that a payment is a reimbursement rather than an allowance. A requirement that the recipient refunds unexpended amounts to the employer adds further weight to that presumption.

Based on the fact that the study support was granted in relation to specific tuition fees which you had already incurred and that you had a requirement to show receipts to vouch for the expense, it is considered that the study support payment will be a reimbursement. Consequently this payment will not be included in your ordinary income under section 6-5 of the Income Tax Assessment Act 1997.

Section 51AH of the Income Tax Assessment Act 1936 states that where a taxpayer is reimbursed in whole or in part in respect of an expense, and the reimbursement constitutes a fringe benefit, then the amount of the deduction that has been allowed or would have been allowed is to be reduced by the amount of the reimbursement. A reimbursement of any part of self-education expenses by an employer does constitute a fringe benefit.

In your situation:

• you incurred and paid for self-education expenses relating to course fees

• you have requested that your employer reimburse a portion of the course fees, and

• the reimbursement will be a fringe benefit.

Consequently you will have to reduce your deduction for tuition fees by the amount reimbursed.