Bills Digest no. 39 2008–09
Tax Laws Amendment (Education Refund) Bill
2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Tax Laws Amendment (Education
Refund) Bill 2008
Date
introduced: 25
September 2008
House: House of Representatives
Portfolio: Treasury
Commencement:
Royal
Assent
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Tax Laws Amendment (Education
Refund) Bill 2008 (the Bill) amends the Income Tax Assessment
Act 1997 to introduce the Education Tax Refund (ETR). The ETR
will provide a 50 per cent refundable tax offset for eligible
education expenses up to a maximum of $750 for children undertaking
primary education studies and $1500 for children undertaking
secondary education studies. As the Treasurer explains:
Under the plan eligible families will be able to claim 50 per
cent of eligible education expenses up to $750 for each child
undertaking primary school, to provide a maximum tax offset of $375
per child, per year.For children undertaking secondary school
studies families will be able to claim 50 per cent of their
eligible expenses up to $1,500 per child, to give a maximum tax
offset of $750 per child, per year.[1]
The Bill also makes consequential amendments to the Taxation
Administration Act 1953, A New Tax System (Family
Assistance) (Administration) Act 1999, the Social Security
(Administration) Act 1999 and the Student Assistance Act
1973.
The ETR is a 2008 09 budget measure, which had its basis in a
2007 ALP election policy commitment.[2] It is a refundable tax offset and,
therefore, will apply to eligible applicants regardless of their
tax liability. That is, it will also be paid if the person has no
tax liability.
Taxpayers who are entitled to the ETR include those in receipt
of Family Tax Benefit (FTB) Part A payment for a child; taxpayers
and/or their child who receive other payments that preclude them
from receiving FTB Part A[3]; or taxpayers who are independent students and receive
payments such as Youth Allowance, Disability Support Pension or
ABSTUDY Living Allowance.
The ETR will apply to eligible expenses incurred from 1 July
2008 and will be claimable when income tax returns are submitted.
Therefore, the ETR will be claimable from 1 July 2009.
Eligible expenses for the ETR include the purchase, lease or
hire-purchase of:
- computers and computer-related equipment, such as printers and
disability aids, and associated costs
- a home Internet connection
- computer software
- school textbooks and other paper-based school learning
material, including stationery and
- course-prescribed tools of trade.
Other provisions in the Bill include:
- for a student who if a child transitions from primary to
secondary education during a financial year, the ETR will apply at
the secondary rate for the entire year and
- education expenses in excess of the taxpayer s offset limit for
a financial year can be transferred to the subsequent income
year.
The Coalition also gave an election policy commitment to provide
a tax rebate for education expenses a rebate of 40 per cent for
education expenses up to $800 annually for each secondary school
student and up to $400 for primary and preschool.[4] However, there were some
significant differences in its proposal, notably that it was
universal (not means-tested); included preschool education
expenses; and applied to school fees and levies, school uniforms,
extra-curricula school activities and tutoring. Back to top
The ETR is estimated to cost $4.4 billion over four years as
follows:
- 2008 09 $1015 million
- 2009 10 $1095 million
- 2010 11 $1135 million and
- 2011 12 $1165 million.[5]
The final expenditure will depend on the number and amount of
ETR claims.
The ETR comes in the wake of reports over several years that
have highlighted the difficulties of schooling costs for low-income
families. For example, the Brotherhood of St Laurence s 2007
Education Costs Survey found 72 per cent of respondents could not
afford items for that would improve the education experience of
their children and two-thirds did not have a home computer with
Internet access. About 60 per cent had difficulty paying for books
and almost half reported difficulty paying for equipment.[6]
Therefore, the ETR will be welcomed by low-income families.
However, the differences between the proposed ETR and the Coalition
s election policy commitment, and other findings of the St
Brotherhood of St Laurence and similar surveys, draw attention to
what is excluded from the ETR.
Eligible expenses for the ETR focus in the main
on information communications and technology (ICT) and as such
complement the Government s Digital Education Revolution,
which is providing $1.2 billion over five years for ICT in
schools.[7]
The exclusion of school-based extra-curricula activities is in
spite of a number of reports that have highlighted the burden of
this aspect of schooling for low-income families. The Brotherhood
of St Laurence survey found that 69 per cent of parents reported
difficulty paying for sport or recreation, 62 per cent for camps
and 47 per cent for excursions. Thirty-nine percent of respondents
reported that their children had been absent from school because of
their inability to pay for the extra costs of excursions, sport
days, school camps, uniforms and equipment, lack of transport and
food insecurity.[8]
The Smith Family also identified and responded to this problem by
establishing its Learning for Life scholarships to assist families
to pay for school uniforms, text books and excursions.[9]
Education expenses in relation to preschool education are not
eligible for the ETR. Given the Government s emphasis on early
childhood education, some may question this omission.[10] Further, the national
preschool education inquiry, conducted for the Australian Education
Union in 2004, identified the costs of preschool education as an
impediment to preschool participation.[11]
The ETR applies to primary
and secondary education broadly, which means that for the first
time the Commonwealth is providing some support for children who
are educated at home. Currently neither the Australian or state and
territory governments provide substantive funding for children who
are home educated, although all states and territories do provide
some form of material assistance, including, in some cases, access
to general student allowances. The ETR will at least bring the
Commonwealth into line with other jurisdictions which provide this
level of support.
There may also be some question about the timing and delivery of
the ETR. The requirement to pay the expense upfront without
immediate reimbursement may be problematic for some disadvantaged
families. In the case of excess education
expenses which are deferred for ETR claiming until the following
year, the time lag is even longer. In this respect, a parallel can
be drawn with the Government s decision to pay the Child Care Tax
Rebate quarterly rather than annually.[12]
Item 3 of Schedule 1 inserts a new subdivision
61-M into the Income Tax Assessment ACT 1997 to provide
for the Education Tax Refund (ETR):
- proposed sections 61-610 and 61-620 set out
the entitlement and eligibility criteria for the ETR
- proposed section 61-630 defines the levels of
education to which the ETR applies. Subsections
61-630(2)(b) and 61-630(4)(b) specifically include primary
and secondary students who are home schooled
- proposed section 61-640 defines the expenses
which are eligible to be claimed under the ETR
- proposed sections 61-650, 61-660 and
61-670 set out the amount of the ETR and provide the
formulae for calculating the ETR amount and
- proposed section 61-680 provides the
arrangements for calculating excess education expenses and makes
provision for the excess to be claimed in the following year.
Items 1, 6 and 7 of Schedule 1 make amendments
to A New Tax System (Family Assistance) (Administration)
Act 1999, the Social Security (Administration) Act
1999, the Social Security (Administration) Act 1999
and the Student Assistance Act 1973, allowing disclosure
of information relating to the offset to the Commissioner of
Taxation.
Item 8 of Schedule 1 makes consequential
amendments to the Taxation Administration Act 1953.
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Concluding comments
While the ETR should be welcomed, the debate may well centre on
what is not a claimable expense, such as expenses related to
extra-curricula activities, school uniforms and school fees. There
may also be a question about the ETR amount and the additional
capacity it will provide to disadvantaged families to purchase
costly items such as ICT. This capacity may also be compromised by
the delay in claiming the ETR.
[3]. These payments include ABSTUDY, Student
Financial Supplement Scheme, Veterans Children Education Scheme;
and various income support pension and benefit payments, such as
the Disability Support Pension, Newstart Allowance and Youth
Allowance.
Marilyn Harrington
13 October 2008
Bills Digest Service
Parliamentary Library
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