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A study in recovery

Sydney Morning Herald

Wednesday March 9, 2011

Annette Sampson

The strategy To claim my self-education expenses if I received Youth Allowance while I was studying.Can I do that? You may remember a High Court decision late last year that found a woman studying full time to become a teacher and working part time was entitled to claim self-education expenses while receiving Youth Allowance. While the Tax Office had denied her claim, the court ruled she could claim the expenses because she incurred them meeting the Youth Allowance eligibility requirements, even though the study had nothing to do with her part-time job. To receive Youth Allowance, she had to undertake her study in a particular manner and to a particular standard.This has opened the door for other students receiving Youth Allowance to lodge similar claims - for past years as well as this year and in the future.The Tax Office has now issued guidance on what the decision means for those affected and how they should go about claiming.So how will it work? If you received Youth Allowance to study full time, declared it in your tax return during the past four years and did not claim self-education expenses, the Tax Office says it will write to you before April 30 to let you know it will automatically amend your assessment to include a deduction of $550 for each year you are eligible. That figure is based on the average estimated expenses of students in full-time education, after excluding expenses that are not allowable (such as living expenses) and the first $250 of education expenses, which is not deductible.If you spent more than this, you will need to request a formal amendment and substantiate your claim. The Tax Office's letter will tell you how.If you're eligible for an amendment and paid tax in that particular year, this should now mean you're entitled to a refund. But that doesn't mean you'll get a cheque for $550. Tax deductions, remember, reduce your taxable income, so the refund will depend on your tax rate for that year and how much tax you paid. If you only received Youth Allowance, you won't have paid tax and so won't have your return amended. The Tax Office will pay interest on any refund you receive.If you want to claim expenses for 2006 or an earlier year, you'll need to lodge an objection to that year's tax return along with a request for the Tax Office to treat your objection as if it had been lodged on time (objections can normally only be lodged within four years of an assessment being issued).The Tax Office says it will only grant these objections if there are special circumstances, such as serious illness. For future tax returns, Youth Allowance recipients simply need to claim the expenses as part of the normal process. They don't have to provide records of expenses when lodging the return, though they may be asked to justify the claim later on.If you still haven't lodged your return for 2010, the Tax Office says you should claim the expenses when you fill it in, ignoring the instructions that say you can only claim for a course that is related to your work as an employee. That will be amended in future returns.Note that the change does not include Youth Allowance paid to 16 to 20-year-olds when they are looking for work or undertaking approved employment-related activities.What if I've already claimed self-education expenses? Will I get a top-up if I claimed less than $550? No. If you've already claimed for self-education your returns won't be automatically amended. If you feel you have under-claimed, you will need to request an amendment to your return.Does this cover me if I received a different government benefit, such as Austudy or Abstudy? Not at this stage, though the Tax Office says it is considering the implications of the High Court's decision and whether recipients of other benefits are affected.

© 2011 Sydney Morning Herald

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