Apparently the Government have finally reached agreement regarding the passage of the Youth Allowance bill in the Senate (I posted a bit about this way back in July when it was first announced). This should see more than 150,000 students start to receive new scholarships from April 1st. It’s worth noting that a few changed have been made to the bill since I first post about it, including a small descrease in start-up scholarship amounts).
Key changes to Youth Allowance:
It’s estimated that more than 100,000 students will be better off under the changes by receiving more Youth Allowance or Youth Allowance for the first time. New parental income test arrangements will come into force from July 1. I’ll post more on this once I’ve had a chance to look further into it.
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{ 4 comments… read them below or add one }
Hi, Just wondering if this start-up scholarship is taxable?
Thanks
Hi Jimmy,
According to the Department of Education, Employment and Workplace Relations (DEEWR), the Student Start-up Scholarship is non-taxable. FYI, in 2011, the payment amount will be $1,097 for each 6 months of eligible study.
Hope that helps.
Hi,
Re the current financial year, is it correct that Youth Allowance is classified as unearned income and not not eligible for the Low Income Tax Offset?
If that is correct, there will be many students (minors) that will be affected perhaps not realising a tax liability.
Please inform me whether the tax threshold for unearned income for this financial year is $416, and what rate of tax will be applied over this amount.
If my understanding is correct, there will be many students, especially those living out of home, who will get a nasty surprise at the end of this financial year if there is minimal publicity about this matter.
Hi Lu,
There are a lot of separate issues here.
First of all, for the 2010-2011 financial year, minor’s still receive the full benefit of LITO ($1,500). This was only just changed in the latest Federal Budget announcement and won’t be taken away from the unearned income of minors until the 2011-12 financial year. To answer your first question, yes, from 1 July 2011, the unearned income of minors will need to be below $416 before it is taxed at a ridiculously high rate.
The income of minors is classed as either ‘unearned’ or ‘excepted’. Unearned income is taxed at the higher rates and excepted income is taxed at the ordinary marginal rates.
For 2010-11, excepted income of minors includes any employment income and taxable payments from Centrelink. This includes Youth Allowance. If you only had Youth Allowance and part-time work, for instance, you would be taxed at the ordinary rates like everybody else.
Of course, the recent Anstis case opened up a big can of worms and we saw the ATO trying to argue that Youth Allowance was ‘unearned income’… the primary reason being to disallow any tax deductions made against this income. Of course, the ATO lost the and were forced to allow tax deductions against the Youth Allowance of certain students (backpaying this to 2006-07). For the 2010-11 year, Newstart recipients can even claim costs associated with jobseeking, etc. As a result, the Government vowed to amend the tax legislation to ensure that taxpayers cannot claim deductions against government assistance payments from 1 July 2011. That’s not necessarily the same as declaring Youth Allowance as ‘unearned income’ but I guess we’ll have to wait and see how it pans out.
As it stands today, Youth Allowance is not ‘unearned income’ and is treated as any other taxable income, taxed at ordinary marginal rates.