Hundreds of thousands of youth allowance recipients will be able to claim their education costs as tax deductions as a result of a landmark High Court judgement delivered today in Canberra.

The Commissioner of Taxation had appealed to the High Court to overturn a Federal Court ruling, which allowed former Australian Catholic University student Symone Anstis to claim deductions for her study costs because they were incurred in gaining her youth-allowance income.

But the High Court today dismissed the appeal and ordered the Commissioner to pay Ms Anstis’ costs.

The ruling opens the way for hundreds of thousands of youth allowance recipients – and possibly other income-support recipients – to claim tax deductions for expenses they incur in qualifying for their payments.

In its advice to the incoming federal government in September, Treasury warned that if the High Court dismissed the Commissioner of Taxation appeal, there would be “significant budget implications”. The cost for the budget is not known but is likely to represent several million dollars.

Ms Anstis, a former Australian Catholic University student, was successful last year in her bid to claim $920 as self-education expenses after fighting the Taxation Office through a number of jurisdictions over three years.

While studying full-time to be a primary teacher, Ms Anstis worked as a part-time sales assistant for retail chain Katies, where she earned $14,946. She also received a youth allowance of $3622 during the 2006 income year.

She claimed education expenses including travel costs, supplies for children during teaching rounds, student administration fees and depreciation of her computer.

The Tax Office rejected the claim, so Ms Anstis and her father, Michael, who is a qualified solicitor but does not work as a lawyer, fought it all the way to the Federal Court, which handed down its ruling in Melbourne last November.

The full court of the Federal Court upheld an earlier decision that because the former student had to be enrolled in a full-time course of study to get her assessable income of youth allowance, any costs incurred in the course of studying should be deductible.

About 440,000 students receive youth allowance or Austudy. Many of these students would earn enough with the addition of part-time work to have a tax liability, according to Asssociate Professor Dale Boccabella from the University of NSW.

He said last year items including computer depreciation, stationery or textbooks could now be claimed as a deduction. In the past, the Taxation Office had made it clear it would not allow educational expenses to be claimed against welfare payments.

“The decision further complicates tax administration in the area of self-education expenses, an area that is already riddled with difficulties,” he said.

The Commonwealth Ombudsman has slammed the taxation office for failing to properly handle complaints about misused tax file numbers. A report released on Tuesday detailed eight cases where the numbers were compromised or linked to the wrong person.

In one case, a welfare recipient was hit with a $7000 Centrelink bill and a $2250 tax penalty after another taxpayer made an error with an online tax return. In another case, the Australian Taxation Office (ATO) wrongly assumed a pensioner from a non-English speaking background had two tax file numbers, which meant income was incorrectly attributed to her. Both cases took two years to resolve. Ombudsman Allan Asher said the ATO’s response to tax file complaints was unreasonable.

“Our investigations have shown a systemic failure by the ATO to properly recognise and respond to the issues faced by taxpayers,” he said in a statement.

The ATO’s second commissioner, David Butler, admitted it could have handled the cases better.

“We have carefully reviewed the draft report and agree that the experiences for some taxpayers with compromised tax file numbers have been less than satisfactory,” he said in a letter to the ombudsman dated June 29.

But he insisted the errors were not typical. The tax office has since adopted five recommendations by the ombudsman. Among them, it set up a client identity support centre in late 2009 to investigate identity fraud. It has also taken steps to monitor cases of compromised tax file numbers, and has hired case managers to contact affected taxpayers. An ATO spokeswoman said the tax office would continue to work with the Commonwealth Ombudsman on future concerns.

There have been an embarrassing series of revelations about the conduct of the Tax office in relation to a number of issues recently. The handling of the tax matter related to Paul Hogan was a situation where the tax office was forced into an embarrasing reversal of its decision to prevent Mr Hogan from leaving Australia whilst an investigation into his affairs continued.

The deadline is fast approaching for filing your tax return for June 2010 unless you are using a registered tax agent. For most people the process is actually surprisingly simple. Many people are eligible to file a short form of an individual tax return which is available from our website here. Many new agents also stock the ‘tax pack’ which is a document that can be used as a guide to how to lodge your taxes but for a precise work is essential to contact a atlanta ga tax lawyer. The current version of this is the Taxpack 2010 which we have available here for a free download. We also have some of the other common forms which people use for lodging their individual tax returns which are the short form tax return, the eligibility criteria for the short form tax return, the short form tax return instructions. We are also progressively releasing a number of the tax forms for free use by you so that you can get a grip on how to file your taxes this year.

So, the downloads which we have available are:

Short Form individual tax return 2010:

Short Form Individual Tax Return 2010

Short Form individual tax return 2010 Instructions:

Short Form Individual Tax Return 2010 Instructions

Short Form individual tax return 2010 Eligibility Criteria:

Short Form Tax Return 2010 – Eligibility Criteria

Tax Pack 2010:

Tax Pack 2010

These are copies of the official documents provided for free from the ATO. They are public documents. You should however, get professional advice about this if you need some guidance about how to fill these forms in. Get some guidance from the lawyers available here. If you have questions about the tax filing process and you would like profession guidance, we also have lawyers available who you can contact using the contact form to the right of this page. The form will allow you to chat to a lawyer about your issue almost instantly.

Do you have questions about how to calculate the withholding amounts for withholding taxes?

Download ATO Document – Formulas for calculating amounts to be withheld

This can be a very complicated process. It needs to be done quickly and accurately though to maintain business efficiency in a way that ensures that your business is run effectively and in accordance with the taxation law. If this is not done properly it can expose your business to some very serious penalties like failure to withhold penalties or penalties for withholding too much from your employees. If you want to check how much should be being withheld from your pay, you can use this tables as well to verify what the accounting department of your organisation is doing in relation to the amounts that should be withheld so that you do not get surprised when it comes time to file your tax return at the end of the financial year and discover that you owe more tax than you thought that you were going to.

The most common form of withholding tax is through the PAYG (Pay As You Go) system of withholding. This is the system which is used for employees who earn a regular wage from working in a business or a government or not-for-profit organisation. The law mandates that tax must be withheld from a person’s pay and given to the government during the course of the administration of the tax year rather than at the end which is presumably a system that came into being to ensure that enough money is kept in reserve by the vast majority of organisations to pay taxation and that the bill will not come in one massive hit at the end of the year. It also allows the work of taxation administration to be ongoing throughout the year rather than piled all into the period when tax returns are filed. Other forms of withholding are where a TFN is not quoted and the full rate of tax is applied as a penalty such as in the case of the payment of company dividends. If you have a question about this area of the law, please do not hesitate to contact us.

To get a copy of this document click here:

ATO Document – Formulas for calculating amounts to be withheld

Getting audited by the ATO can be a daunting prospect. Ultimately its is true that honesty is the best policy and that an attempt to hide something from the ATO will almost always end in tears. You need to make sure that you have all of your documents in order and that you know exaclty what to look for when you are asked questions about what you have claimed. If you are not well prepared in this way, you may face a negative outcome of the audit and further consequences. In 2005/2006, the ATO’s compliance activities raised $6,244 million including tax, penalties and interest. This was mainly as a result of penalities imposed from audits which found that many businesses had failed to pay tax correctly.

During an audit, the ATO:

* examines the tax affairs and records of a taxpayer to ensure that reported information is accurate and to confirm the taxpayer’s tax liability;
* may examine the tax records of other persons which may shed light on the taxpayer’s tax position; and
* may cross-check data against different sources (for example, interest payment records forwarded by financial institutions) may send ATO officers to visit the taxpayer’s (or third party’s) premises to examine records.

So what are some key things to remember if you are being audited or face the prospect of being audited?

1. Document retention policy

Taxpayers should implement an appropriate document retention policy and administrative filing system to enable them to retrieve records efficiently during an audit. The tax laws impose a positive obligation on taxpayers to maintain records that document and explain all transactions and other acts engaged by the taxpayer that are relevant for the purposes of the taxation laws. Taxpayers should determine which documents are protected by “privilege”, mark them as privileged and arrange for them to be kept separate from “non-privileged” documents. This enables the taxpayer to minimise the risk of privilege being inadvertently waived.

Which documents are privileged?

Generally, if a taxpayer has a document that is privileged, then it usually does not have to show that document to the ATO or to a court. The types of privilege available to a taxpayer include legal professional privilege, accountants’ privilege and corporate board document privilege.

If you have any questions about being audited, please do not hesitate to contact us using the for to the right. We would be more than happy to help you.

Last week, after the Australian Taxation Office had placed an order on the famous Actor Paul Hogan that he be prevented from leaving the country, the decision has been made subject to legal challenge in the Federal Court. The Australian Taxation Office served the order on Mr Hogan as he was attending his mother’s funeral in Sydney. The federal government agency now says that Mr Hogan has waived his right to confidentiality in relation to the documents which have been seized from him by the ATO. At this stage it is reported that the ATO has assessed Hogan’s liability for unpaid tax at over $100,000,000.00. If Hogan wins, it will be an embarrassing mistake for the ATO which has

Hogan’s lawyers claim documents seized by the Australian Crime Commission are confidential and should not have been released to tax auditors. They co-operated with the Tax Office when it sought access to the documents in 2008, the court heard yesterday, but reserved their rights and tried to claim confidentiality after Mr Hogan was interviewed by auditors in 2009. The basis of this is what is known as an ‘accountants concession’ which is similar to a right of legal professional privilege.

The Tax Office claim that he had waived confidentiality was ”disingenuous” and ”an absolute nonsense”, said barrister Helen Symon, SC, appearing for Mr Hogan. ”The claim is made and is met with a sidestep [by the Tax Office]. All that Mr Hogan knows is that documents have been received from the ACC and he doesn’t even know what they are.”

Desmond Fagan, SC, appearing for the Tax Office, said Mr Hogan had ”effectively abandoned any resort to the accountants concession” and tried ”belatedly” to claim it after auditors had shown him seized documents. In the case of Mr Cornell and Mr Stewart, he said that access was granted to the auditors because of exceptional circumstances where there was a ”reasonable suspicion of fraud or [tax] evasion”.