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.
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.
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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