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Is the taxpayer entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for payments to reduce their full- fee paying student Higher Education Learning Programme (FEE-HELP) debt?

No. The taxpayer is not entitled to a deduction under section 8-1 of the ITAA 1997 for payments to reduce their FEE-HELP debt.

The taxpayer received a loan under the terms of FEE-HELP contained in Part 3.3 of Chapter 3 of the Higher Education Support Act 2003 (HESA 2003) to pay their course (tuition) fees.

The taxpayer makes payments to reduce their FEE-HELP debt.

Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent that they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. However, a deduction will not be allowed where another provision of the ITAA 1997 specifically prevents it.

Paragraph 26-20(1)(cb) of the ITAA 1997 specifically prevents a deduction for payments made to reduce a debt to the Commonwealth under Chapter 4 of the HESA 2003. Chapter 4 of the HESA governs debts raised as a result of loans made under Chapter 3 of the HESA 2003, which includes FEE-HELP loans.

The taxpayer has made payments (either as voluntary payments or as part of their income tax assessment) to reduce their FEE-HELP debt. Paragraph 26-20(1)(cb) of the ITAA 1997 operates to deny the taxpayer a deduction for payments. Therefore the taxpayer cannot claim a deduction in respect of the FEE-HELP debt payments under section 8-1 of the ITAA 1997. Note. This discussion is equally applicable where a taxpayer has obtained a HECS-HELP loan under Part 3.2 of Chapter 3 of the HESA 2003 or and OS-HELP loan under Part 3.4 of Chapter 3 of the HESA 2003 and makes payments to reduce their HECS-HELP or OS-HELP debts.