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Education Expenses
12.31. The present law allows a deduction, first introduced in 1972, for education expenses incurred by the taxpayer on his own behalf up to a prescribed limit (section 82JAA); and another deduction, dating from 1954, for such expenses incurred by a taxpayer in respect of his own child under 25 or of a person for whom he may claim a dependant deduction if that person is under 25 (section 82J). This latter deduction is also subject to a limit in respect of each person for whom a claim may be made. Until 1974 the limit, under both section 82JAA and section 82J, was $400; this has now been reduced to $150.
12.32. The deduction for self-education expenses was considered in paragraphs 7.97-7.100 and some observations were made about its correlation with the deduction for other education expenses. The Committee there foreshadowed its recommendation that the deduction for the education expenses of a child or other dependant should be retained and converted into a tax rebate. The amount of the rebate in this case would depend on applying some given percentage to the amount of actual expenditure falling within the limit.
12.33. The case for retaining the concession rests on the importance of preserving freedom of choice of education options and on an argument that it serves an equity purpose. The equity argument makes the assumption that the concession is primarily utilised by parents whose children attend non-government schools and that these schools receive less subsidy per student than government schools. If a subsidy is provided for the child of one parent and a smaller subsidy for the child of another and the parent of the first is not taxed on the difference between the subsidies, there is a case for saying that the parent of the child with the lower subsidy should be given a deduction for what he himself provides in substitution for the difference between the subsidies. The Committee sees some force in this argument and would agree that it points to a deduction rather than to a rebate. However, in so far as the question is one of achieving equity within the group of taxpayers who, in meeting education expenses of their children, provide substitutes for subsidies, a rebate appears more appropriate. The assistance given in the tax system in meeting these expenses should, it is thought, be uniform whatever be the income level of the taxpayers. The Committee therefore recommends that a rebate apply, at a rate of, say, 40 per cent. It also recommends that the limit on the amount of education expenses qualifying for rebate be set at $600 in respect of each child or other dependant. A taxpayer who spends $600 or more in education expenses of his child will thus save $240 in tax.
12.34. At present the expenses qualifying for deduction are described in the widest terms. There are two reasons for preferring a more limited definition. One is that considerable administrative problems are at present involved in checking claims which may include expenses of such items as clothing and travel. The other is to make it more likely that those who benefit by the concession are the parents whose children are the less subsidised by government expenditure. The definition that the Committee favours would limit qualifying expenses to fees for tuition.