Australia: Education Interests

Last Updated: 25 May 2009
Article by Stephen O'Flynn and Michael van Schaik

Education News of the Federal Budget 2009-10

The 2009-10 Federal Budget was released at 7.30pm, 12 May 2009. A summary of the relevant Budget details for the Education sector are set out below:

Investing in Education

  • This Budget invests $5.3 billion in tertiary education, research and innovation over six years.
  • $2.6 billion will be committed to the Education Investment Fund (EIF) for priority infrastructure projects in Australia's tertiary institutions and research agencies. Applications for round 3 of the EIF will commence later this year and successful projects will be announced in 2010.
  • A further $491 million will be invested over four years to uncap the number of university places from 2012, starting with increased places from next year, allowing an extra 50,000 students to commence university courses by 2013.

Research and Development

  • From 1 July 2010, the current research and development tax concessions will be replaced with an expanded tax credit.

The new Tax Credit provides:

  • a 45 per cent refundable credit for firms with an annual turnover of less than $20 million (equivalent to a concession of 150%)
  • a 40 per cent non-refundable credit for businesses with turnover above $20 million (equivalent to 133% concession)

However, the eligibility criteria including the definition of R&D will be tightened to ensure that support is better targeted.

The Government intends to release a consultation paper within the next few months.

Word Investments case

The Government provided an interim response to the High Court of Australia's decision in Federal Commissioner of Taxation v Word Investments, which was handed down on 3 December 2008. This decision dramatically changed the existing interpretation of ATO regarding the entitlement of entities to endorsement as Tax Concession Charities. The significant implications of the case were:

  • commercial businesses with charitable objects that direct their profits to charities are eligible for endorsement by the ATO as tax concession charities and therefore have access to a number of tax concessions; and
  • charities are considered to be pursuing their objectives principally 'in Australia' if they merely pass funds within Australia to another charity that conducts its activities overseas.

In response to the case, the 'in Australia' requirements of Division 50 of the Income Tax Assessment Act 1997 will be amended to ensure that Parliament retains the ability to fully scrutinise those organisations seeking to pass money to overseas charities and other entities.

These changes will only be made after the Henry Review into Australia's future tax system and the Productivity Commission's inquiry into the contribution of the not for profit sector.

Further information can be found on the Assistant Treasurer's website:

Deductible gift recipients

The Government will amend the fringe benefits tax (FBT) law to ensure that donations to deductible gift recipients (DGRs) made under salary sacrifice arrangements do not result in an employer incurring an FBT liability, with effect from the 2008 09 FBT year.

Other major reforms to higher education include:

  • goals for attainment and low socio economic status enrolment backed by funding;
  • a student income support system that is aligned with need;
  • improved indexation arrangements which better support the sector for the long term across learning, teaching and research; and
  • a new national regulator and quality assurance system Tertiary Education Quality and Standards Agency (TEQSA), linked to performance funding.

For further details regarding employment taxes, please refer to Beyond Numbers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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