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Proposed self-education tax deduction cap could cost $6 billion in lost productivity: Universities Australia submission

Helen Alexander /

The federal government’s proposed cap on self-education tax deductions could rob the economy of $6 billion in productivity, the leading lobby group for Australian universities has argued.

The submission by Universities Australia to the Treasury Discussion Paper says the government has underestimated the negative effects of the proposed $2000 cap on self-education tax deductions and could result in a loss in tax revenue of $841 million a year because of reduced productivity and lower numbers of postgraduate students.

The submission says there will be 30,000 fewer postgraduate students, as the effective cost of enrolling in postgraduate fee paying courses will increase by at least 30% and by as much as 54%.

“This policy proposal pulls in precisely the opposite direction to the government’s objective,” Universities Australia chief executive Belinda Robinson said in a statement.

“This is a counter-productive, ill-conceived and unfair taxation measure,” she says.

The proposed cap has been strongly opposed by many education and business groups, as they’ve joined together to form the Scrap the Cap alliance. Resistance to the move has strengthened since Kevin Rudd’s return as Prime Minister.

The cap is designed to raise $270 million a year by 2017 and was announced by former treasurer Wayne Swan as a way of funding the Gonski education reforms.

A spokesperson for Education Minister Bill Shorten previously told SmartCompany the cap is “sensible”.

“The government has made sensible changes to the allowable deductions for self-education that reflect an appropriate level of claimable expenses.”

Universities Australia says the cap will impact low-income earners, women and people from rural and regional communities the most.

Last month, Higher Education Minister Kim Carr told critics they could submit their own proposals in response to the discussion paper, so long as they were budget negative.

“I have made clear my intentions to engage widely with the higher education sector.”

“My door is open for them to raise any issues and put forward any proposals – provided they are budget-neutral,” Carr said in June.

To make its proposal “budget-neutral”, Universities Australia has proposed reducing the no-claim threshold for all work-related expenses from $250 (the present amount) to $90, effectively spreading the costs to all taxpayers, rather than a select group.

Tax Institute senior tax counsel Robert Jeremenko told SmartCompany while in agreement the $2000 cap should be altered, Universities Australia’s proposal “is not appropriate”.

“What it needs to do is remind the government the application of a blunt $2000 cap across the board is not the way to achieve good policy outcomes.

“If it’s worried about people spending money on accommodation and travel, the government should look at targeting these areas with some sort of amendment,” he says.

Jeremenko says the cap is a “blunt instrument” which will have unintended consequences.

“If the government is worried about people misusing the tax system and claiming travel and expensive accommodation, it can get the Tax Office to better enforce the current law since in a lot of cases these things aren’t legal anyway.

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