Tax deductibility of postgrad uni fees

[VYBerlinaV8]

Quick question for those who know:

If someone undertakes postgraduate study in a course directly relevant to their current employment (e.g. a communications specialist does their Master of Comms), the course fees and related expenses should be tax deductible.

What about if the same person is able to do the course and use the HECS system to pay the fees? Is the amount of HECS tax deductible in the year it is incurred, even though the cash changes hands at a later date?

Thanks in advance.

 

[Rob G.]

1) Maybe, but depends on your facts

2) No

 

[D.T.]

Ive taken courses before that were work related and hence deductible. The funding of which was not.

 

[VYBerlinaV8]

1) Maybe, but depends on your facts

2) No

Why is this? It's a legitimate expense, and money is borrowed to pay for it.

 

[S.T]

Does it have something to do with university study already being heavily subsidised by the government for local students?

or perhaps as the reason you're studying is not to be able to do you current job, but get a promotion in your current job?

 

[ozmale42]

I understood that HECS fees are not dedutible to an individual as a self education expense but would be deductible to an employer if they are incurred in relation to a course being undertaken by a staff member. They would also be free of FBT.

I'm not sure if a post grad course would incur HECS fees unless things have changed since my uni days or I have misunderstood the OP's question. They are full fee paying courses and deductible to the individual if related to the person current employment. The MComm course would be deductible to the person described in your example after the $250 threshold is applied.

 

[neK]

Interested in knowing the answer to this as well.

As far as I know, paying off an accumulated HECS / HELP debt is NOT tax deductible.

However this is a very different question.

VYBerlinaV8 is asking if they commence studying a course now that is directly relevant to their current employment, if they paid for it cash, they would be able to claim it as a tax deduction.

However if they used the HEC/HELP debt system to pay for the course upfront, would they still be allowed to claim a tax deduction. (we're not talking about the HELP repayments over the course of the next 5-10 years or any lump sum payments to HELP debt).

 

[ozmale42]

If deductible the timing of the deduction is based on when the cost is incurred not when it is paid.

 

[VYBerlinaV8]

Interested in knowing the answer to this as well.

As far as I know, paying off an accumulated HECS / HELP debt is NOT tax deductible.

However this is a very different question.

VYBerlinaV8 is asking if they commence studying a course now that is directly relevant to their current employment, if they paid for it cash, they would be able to claim it as a tax deduction.

However if they used the HEC/HELP debt system to pay for the course upfront, would they still be allowed to claim a tax deduction. (we're not talking about the HELP repayments over the course of the next 5-10 years or any lump sum payments to HELP debt).

Exactly. The cost for the first year of study is incurred and paid in year 1, with money borrowed from the HECS/HELP system. It's no different from borrowing from a bank.

 

[HillsGirl]

What institution would the course be conducted through?

 

[marg4000]

Exactly. The cost for the first year of study is incurred and paid in year 1, with money borrowed from the HECS/HELP system. It's no different from borrowing from a bank.

Yes it is.

The repayment expectations and costs are vastly different.

Unless you have actually spent money, you can't claim a deduction.

With HECS, you don't pay the fee. The scheme does, then you pay it back (theoretically)

If you borrow from the bank and actually pay the fees, you will have a receipt for payment which will substantiate a deduction.

Had 3 kids go through uni. With HECS they simply signed the form. No money was paid at that time.
Marg

 

[HillsGirl]

this booklet might be of interest

http://studyassist.gov.au/sites/StudyAssist/HelpfulResources/Documents/2012 booklet FEE-HELP.pdf

 

[VYBerlinaV8]

Yes it is.

The repayment expectations and costs are vastly different.

Unless you have actually spent money, you can't claim a deduction.

With HECS, you don't pay the fee. The scheme does, then you pay it back (theoretically)

If you borrow from the bank and actually pay the fees, you will have a receipt for payment which will substantiate a deduction.

Had 3 kids go through uni. With HECS they simply signed the form. No money was paid at that time.
Marg

I agree with what you're saying, but I think this is a different situation. First, the person is already working in the field in which they are studying, and have done so for over 10 years. Second, you do get a statement showing HECS 'payments' made to the uni. I also went through uni on HECS as an undergrad so I'm familiar with the process.

The bit that makes this a grey area is that it is like capitalising interest on an investment loan. Money does not change hands, but it is 'spent'.

Thanks for helping me work through this!

 

[Rob G.]

Whether any of the individual modules is deductible depends upon it being relevant and incidental to your current income earning activities.

There is a lot of case law on the required connection.

Take a look at TR 98/9.

You claim a deduction in the year the liability is incurred, this is not necessarily the same time as when paid.

HECS debt repayments are NOT deductible, s.26-20 ITAA97.

 

[VYBerlinaV8]

Whether any of the individual modules is deductible depends upon it being relevant and incidental to your current income earning activities.

There is a lot of case law on the required connection.

Take a look at TR 98/9.

You claim a deduction in the year the liability is incurred, this is not necessarily the same time as when paid.

HECS debt repayments are NOT deductible, s.26-20 ITAA97.

Agree with all this, but I'm not referring to payment of HECS, but rather incurring and paying further education expenses (using HECS as finance) for a course directly and demonstrably relevant to the person's current professional career.

 

[coastymike]

Section 26-20 of the ITAA 1997 denies deductions for certain HECS and student assistance payments.
Paragraph 26-20(1)(ca) of the ITAA 1997 specifically prevents a deduction for student contribution amount paid to a higher education provider in relation to HECS-HELP.

Paragraph 26-20(1)(cb) of the ITAA 1997 specifically prevents a deduction to reduce a HECS-HELP debt.
In your case, your course fees are paid under the HECS-HELP system. That is, you have not incurred these fees as the Commonwealth has paid the course fees on your behalf.

You will, however, be obliged to make payments either as voluntary up-front payments or later as part of your income tax assessments under HECS-HELP. In accordance with section 26-20 of the ITAA 1997, you are not entitled to a deduction for these payments.

HECS doesnt have an interest component. The outstanding balance is indexed annually so probably one of the reasons why the increase isnt deductible as the loan doesnt have an interest component compared to a normal loan which charges interest.

Whether the course fees themselves are tax deductible depends on the rules set out in TR 98/9 as indicated by Rob.

 

[LukeQLD]

Basically:

Any course fees paid under the HECS-HELP scheme are NOT deductible.

Any course fees paid under the FEE-HELP scheme are deductible (as long as they are work related of course).

You should know what scheme your courses are paid under via the relevant student system's course receipts.

Just went through all this with my accountant, was a real pain trying to educate her on the subject.

-----

In case you are wondering why this is the case:

HECS-HELP
It is because undergraduate university courses and *some* postgraduate courses in Australia are heavily subsidised by the government (for Australians). That is to say, the Australian tax payer is already paying for a large chunk of your education, that's why you can't claim more deductions on it. No double-dipping so to speak.

FEE-HELP
On the other hand, any international students studying undergraduate and postgraduate courses, and Australian students studying *some* postgraduate courses, pay the full amount of the course as set by the university in question. There is no taxpayer funded subsidy on these courses, therefore any students studying these courses are able to claim tax deductions if they meet the relevant work related requirements etc.

 

[coastymike]

There are policy reasons as to why HECS is not deductible. If it was deductible then other taxpayers are paying for those undertaking courses. Past and current governments have decided for tax equity purposes it is obviously better to provide a benefit (by way of an indexed loan which is later repaid using taxable income scales) than allowing a tax deduction. Whether these policy reasons are right has obviously been studied and analysed by the economic advisers to government and it has been decided from an equity perspective this was the right was to fund things.

Excellent response luke

 

[VYBerlinaV8]

Thanks all, very helpful indeed.

 

[Paul@PFI]

Open Learning - A spanner in the works !

1. HECS ended years ago. Its now called HELP. That's also the noise people make when they find out the 20% discount for upfront fee payment is about to be cut by the new Govt. Soon the cost for education will be indentical if you have cash or need the loan method. Now its gets complex and there is HECS HELF and fee help. See Luke's explanation. HELP !!

2. Open Learning HELP scheme is also slightly different. The "basic fee" is not deductible even if paid upfront. Its approx 20% of the total fee per subject.

3. Fees for subjects depend on the institution, the course (ie medical and law are weighted to cost more !) etc. Depend who funds it too. So for example a private "college" may also joing the HELP system.

Luke has raised a issue few tax agents understand...Its an issue determined by the course provider AND if they get Federral funding for the "course"...So same institution can have different courses with different fees and different outcomes but its one course of qualification...Go figure !! (There are limited Fed Funded places too!!). If the uni gets Federal funding its a non-deductible (eg Sydney Uni) but if its another entity such as Open Learning it may be !!! However often then a "basic fee" is considered non-deductible.

My wife did a post grad masters and it was a non-federally funded position through a Catholic Uni. Tip for tax advisers - Most post grad and NOT Federally funded. Only degrees are usually funded. Hence it was deductible and funded. I'm in tax and had to write to ATO get get it confirmed its so vague. I recall I found this issue in the fine print of the most recent self education ruling. I foudn NOTHING and had to ask. Unis wont give tax advice and tax office was only help as they administer HELP and know the rules.

I would recomemnd a course in tax law to understand this debacle. If its a degree its not deductible. If its a post grad its possibly deductible. But only if you are already in the tax industry