Should students be able to claim YA eligibility expenses?

As reported this morning, the full court of the Federal Court has rejected the ATO’s appeal against the decision we discussed in April to allow as tax deductions expenses that help make students eligible for Youth Allowance.

The respondent in this case, Symone Anstis, had claimed expenses for among other things her textbooks, depreciation on her computer, and supplies for children on her teaching rounds.

As Youth Allowance eligibility broadens over time this is likely to be an increasingly expensive decision. I don’t expect many continuing YA-dependent students will have paid any income tax they haven’t already claimed back via the low-income tax offset system (which has become more generous since Anstis made her claim).

However there will be many who receive YA for half a financial year as they complete their course, but then earn enough as full-time workers in the second half of the financial year to to have a tax liability for the whole financial year.

What in practice this decision will do is give a small financial advantage to ex-YA recipients compared to other graduates who relied entirely on their own earnings in their final semester. Particularly given the legacy of widespread rorting of the YA ‘independence’ test, this group should not receive another handout. There is a still a YA reform bill stalled in the Parliament. It should be amended to abolish these deductions.