The question that was being considered was whether a person who is being paid Youth Allowance can claim their study related expenses as deductions under the Income Tax Assessment Act 1997 (Cth) ("ITAA").
The answer, contrary to the Tax department's long held policy, is yes.
The Court found that expenses are deductable because they are incurred for "the purpose of gaining or producing assessable income". They reached that decision because, in order to gain the benefit of Austudy, you:
- are required to be enrolled in a certain amount of study (3/4 full load, I think); and
- have to perform that study to an acceptable level (i.e. centrelink retains a discretion to revoke your centrelink if you are failing etc).
The relevant deductions in questions in the case were as follows:
$59 - Travel expenses other than to university (it seems unlikely that travel to university is covered)
$75 - Supplies for children during teaching rounds (she was studying a DipEd)
$80 - Student Administration Fee
$692 - Depreciation – computer
$264 - Textbooks and stationery
Sub Total $1,170
Less $250 reduction pursuant to s 82A(1)
Total Deduction $920
These were all allowed.
They refused, for procedural reasons, to deal with a ground of appeal stating that the depreciation of the computer is not a competent deduction under s 40-25 of the ITAA (at ). And they said that "no inference should be drawn" from their decision that they support that deduction. But s 40-25 seems to rest on deductibility of costs for "the purpose of gaining or producing assessable income" which is the same issue determined in the balance of the appeal.
If this decision withstands the High Court appeal, many other expenses will be deductable too. For example, though they did not say as much, they did imply that bank charges incurred on an account into which the Youth Allowance was paid would be deductable.
I am fond of this case for two reasons. First, I wish that I had had the patience to push this issue when I was at University. Secondly, the case is being argued by Melbourne solicitor, and father-of-the-respondent, Michael Anstis - I like to imagine that his daughter asked him for advice on her taxes one night at the dinner table and a few years later he is up before the High Court defending the opinion he gave.