Ask LH: Why Can’t I Claim HECS-HELP Fees As A Tax Deduction?

Ask LH: Why Can’t I Claim HECS-HELP Fees As A Tax Deduction?

Hi Lifehacker, I’ve just discovered that I cannot claim HECS-HELP repayments as a tax deduction. This makes no sense to me. If I pay my course fees up front I can claim them as a self-education expense, but if I repay them to the government I can’t? What gives? Thanks, Educate Me

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Dear EM,

The Australian Taxation Office (ATO) is indeed quite clear on this point: you can’t claim HECS-HELP fees as a self-education expense when you start paying them back.

Whether you can claim fees paid up-front actually depends on the kind of course you do. If it’s a full-fee course, then you can claim those costs as a self-education expense if they relate to your work. However, if you take a Commonwealth supported place and pay your HECS-HELP up-front (which attracts a discount), you can’t claim that as an education expense either. (As a full-time student, the chances are you won’t be paying much tax in any case.)

The core logic appears to be this: since your course is being subsidised by taxpayers, it’s not reasonable for you to also reduce your taxable income when you pay it back. It’s not consistent — but that’s true of many other tax rules as well. Such is life.

There are contentious government proposals to change how HECS-HELP fees are calculated, but those don’t include any provision to change their tax-deductible status.

Cheers Lifehacker

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  • I vaguely recall this matter being tested around about when I studied tax law (so somewhere like 2000-2006) and I want to believe that the student actually won.

    It wouldn’t change anything anyway today as the Tax Commissioner is given a great deal of power to modify things and it appears the current position is quite clear. I’m not even sure I remember the case correctly anyway.

    • It could be a totally different case, but there was a girl who was receiving youth allowance (which is taxed), who wasn’t able to claim uni supplies on tax. Her dad (who just happened to be a QC) sued the ATO in the High Court, claiming that if it’s taxed, you should be able to claim deductions.

      They won, and the ATO was forced to let uni students claim deductions on supplies if they received any of the Centrelink study assistance packages. That is, of course, until they specifically rewrote the tax law the following year.

        • This had crossed my mind as well!

          Best guess – she was living “independent” of her parents. Usually that means you are living somewhere else, or had worked full time (or equivalent) for a year. Don’t quote me on the details though.

      • Thanks mate that’s what I was thinking of. Yes it’s not the same circumstances as this at all.

  • Two really important notes:

    1. What lifehacker said only applies to HECS-HELP. It does not apply to FEE-HELP.
    (Most postgraduate students find themselves on FEE-HELP, not HECS-HELP)

    2. With FEE-HELP you make the deduction when you incur the fees (ie, when you study). Not when you repay the loan (ie. in the 10 years after you study). Which sucks, because you’re likely to be in a higher tax bracket when you’re paying back the loan than you were when you incurred the expense.)

    So, by this logic, even if you were able to deduct the HECS fees, it’d be in the year when you’re earning bugger all and going to uni, not in the years following when you start earning lots of money.

    • xqx: You actually have to pay the FEE-HELP fees up front if you want to claim them as a deduction. I’ve done this, and is great for post grad stuff if you’re already working. True, you can’t claim any FEE-HELP repayments.

  • Isn’t it funny how places like Germany you can offset your student loans (and university is so so so much cheaper than Australia to begin with) against your tax but Australian government loves to rort you any chance it can get.

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