The case was brought by Symone Antsis, a former Australian Catholic University teaching student. In the tax year in dispute, she earned about $15,000 working for the Katies retail chain and about $3,600 from Youth Allowance. In her tax return, she claimed work-related self-education expenses which included depreciation on her computer and spending on university textbooks.
The rule on self-education expenses is that the deductible expenses have to be related to your current employment. Her expenses were clearly unrelated to selling women’s clothes. But she argued that they were necessary to undertake the studies necessary to maintain her YA eligiblity, and therefore she ought to be able to deduct them.
Amazingly, Justice Ryan of the Federal Court accepted this argument:
The various eligibility and qualifying requirements for Youth Allowance cannot be satisfied otherwise than by enrolling in an educational institution, undertaking the course for the necessary proportion of the normal amount of full-time study, and, in the Secretary’s opinion, making satisfactory progress towards completing the course. If those requirements can, as the evidence in this case demonstrates, only be satisfied by the expenditure of money, then that expenditure is incurred in gaining or producing the Youth Allowance within the meaning of s 8-1 of the ITAA. That the taxpayer’s ultimate purpose or motive in undertaking the course was to acquire a qualification leading to future employment as a teacher is irrelevant to the characterisation of the expenditure. It is sufficient that the expenditure was incurred as a necessary incident of deriving the Youth Allowance.
Where would this logic stop? Should people be able to claim tax deductions for expenses likely to help them stay unemployed or disabled? Should people be able to claim the costs of producing children, so that they can continue to get family benefits (I will leave the possible expenses to the imagination)?
At one level, this will often be an academic question in many cases, since especially with low-income tax offsets many welfare recipients don’t pay any tax and therefore can’t get tax refunds.
But as a matter of public policy, the effective level of benefits should be set in the social security system, without letting welfare recipients get, via the tax system, additional benefits not available to people who have actually earned an income rather than taking a hand-out.