Tax Reform: Proposed Self-education Cap Opposed by University Sector

The federal government's previously announced reforms to "better target" education expense deductions as part of a package of measures that will support the National Plan for School Improvement (NPI) has come under attack from the university and education sector generally who, as SmartCompany reports, claim that such a move "could rob the economy of $6 billion in productivity".

The federal government has argued in its press releases announcing the reforms, such reforms to self-education are needed to help deliver the NPI reforms and ensure that they are sustainable. The federal government reforms envisage a $2,000 cap on work-related education expense deductions to be introduced from 1 July 2014. The government had announced that it would consult on the measure and released a discussion paper the submissions for which closed on 12 July 2013.

The discussion paper "Reform to deductions for education expenses" examined the current treatment of education expenses including what qualifies as an education expense, and worked through the range of issues related to the cap on such expenses, for example, the effect of the cap on the depreciation of capital assets relating to education, the current $250 no-claim threshold and personal services income. The paper also outlined the proposed changes in the income tax legislation and fringe benefits tax legislation.

SmartCompany reports that the submission by Universities Australia to the Treasury Discussion Paper says: "the government has underestimated the negative effects of the proposed $2000 cap on self-education tax deductions and could result in a loss in tax revenue of $841 million a year because of reduced productivity and lower numbers of postgraduate students".

The submission is further reported as indicating that there will be 30,000 fewer postgraduate students, as the effective cost of enrolling in postgraduate fee paying courses will increase by at least 30% and by as much as 54%. Universities Australia chief executive Belinda Robinson is quoted as saying:

"This policy proposal pulls in precisely the opposite direction to the government's objective . . ."

Sources:

• Proposed self-education tax deduction cap could cost $6 billion in lost productivity: Universities Australia submission (SmartCompany) 

• REFORM TO DEDUCTIONS FOR EDUCATION EXPENSES (Teasrury Notice)

• Self-education expense deductions – discussion paper released

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