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ATO Interpretative Decision

ATO ID 2004/294 (Withdrawn)

Fringe Benefits Tax
'Otherwise deductible' rule: application to HECS fees reimbursed by the employer

Attention This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found in the guide: Fringe benefits tax - a guide for employers (NAT 1054).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 28 July 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


If an employer reimburses an employee's Higher Education Contribution Scheme (HECS) fees, can the 'otherwise deductible' rule under section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) be applied to reduce the taxable value of an expense payment fringe benefit?


No. In accordance with section 24 of the FBTAA the 'otherwise deductible' rule does not apply to reduce the taxable value of the expense payment benefit arising through the reimbursement of HECS fees.


An employee of the employer incurred HECS fees in obtaining a university degree.

The HECS debt was paid by the employee.

During the FBT year the employer reimbursed the employee in respect of the expenditure incurred and as such provided an 'expense payment fringe benefit' as defined in subsection 136(1) of the FBTAA.

Reasons for Decision

The taxable value of an expense payment fringe benefit may be reduced under section 24 of the FBTAA to the extent that the 'otherwise deductible' rule (ODR) applies.

The ODR applies when the recipient of the benefit is the employee. Furthermore, the ODR applies where the employee receiving the benefit would have been entitled to a 'once only' income tax deduction for the expenditure had it not been paid or reimbursed by the employer. A 'once only' deduction is one that is wholly or partly allowable in only one year (therefore excluding claims such as those relating to the 'decline in value' of depreciating assets that are spread over a number of years).

Section 26-20 of the Income Tax Assessment Act 1997 specifies that HECS contributions are non-deductible except where a person incurs expenditure in providing a fringe benefit. Although the reimbursement of HECS fees is a fringe benefit and is therefore deductible to the employer, this does not satisfy the requirements of section 24 of the FBTAA. As explained above, to be 'otherwise deductible' the employee must be entitled to an income tax deduction.

Accordingly the taxable value of the fringe benefit cannot be reduced under the otherwise deductible rule.

Date of decision: 4 March 2004

Year of income:Year ended 31 March 2004

Legislative References:
Fringe Benefits Tax Assessment Act 1986
   section 24
   subsection 136(1)

Income Tax Assessment Act 1997
   section 26-20

Related ATO Interpretative Decisions
ATO ID 2001/120
ATO ID 2001/304

Expense payment fringe benefits
FBT otherwise deductible rule
Fringe benefits
Fringe benefits tax
HECS repayments
Higher Education Contribution Scheme

Siebel/TDMS Reference Number: 3760744, 1-BYGP7TK

Business Line: Small Business/Individual Taxpayers

Date of publication: 26 March 2004

ISSN: 1445-2782

ATO ID 2004/294 (Withdrawn) history   Top  
   Date   Version 
    4 March 2004   Original statement   
 You are here ®  28 July 2017   Withdrawn   


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