By Wg-Cmdr David Lindsay

ADF members may receive a generous and wide range of benefits under the Defence Assisted Study Scheme (DASS) and the Career Transition Assistance Scheme (CTAS).

Primarily, the DASS supports members seeking to undertake educational and training courses related to their work or related to a likely change in their ADF career. It also supports vocational courses related to a member’s intended career following discharge.

The CTAS is aimed solely at assisting members to make the transition to civilian employment following discharge. The vast majority of ADF members will, at some stage in their careers, access benefits under one or both of the schemes. There are two financial aspects to be aware of:

• the allowable tax deductions for any costs that are not paid or reimbursed by Defence; and
• the effect of having received some financial support from Defence on entitlements and liabilities that are based on gross income.

These include entitlements to Government-funded benefits administered by Centrelink, and child support payments.
Obviously, members should be aware of the allowable tax deductions to claim all tax deductions to which they are entitled.

Further, members should be aware of some (possibly) hidden or unanticipated financial implications associated with the benefits-so they can budget and plan accordingly.

Some of the benefits available under the DASS and the CTAS are not subject to Fringe Benefits Tax (FBT). However, other benefits are subject to FBT and are reportable on member annual payment summaries. The fringe benefits reportable amount is not included in the calculation of tax payable by a member, but it may be used in the calculation of various surcharges and income tests for certain government benefits such as:

• Medicare levy surcharge;
• deduction for personal superannuation contributions;
• rebate for personal superannuation contributions;
• rebate for contributions to spouse’s superannuation;
• superannuation contributions and termination payments surcharge;
• repayments under the Higher Education Contribution Scheme (HECS) or the Post-graduate Education Loan Scheme (PELS);
• child support obligations; and
• entitlement to certain income-tested government benefits.
  

The first table below details the benefits that may be gained through DASS, whether out-of-pocket expenses are allowable tax deductions, and whether benefits received are FBT-reportable. Remember that all FBT-reportable benefits will appear on annual payment summaries and may have flow-on effects depending on each member’s circumstances.

Note that reimbursement rates for courses sponsored under the DASS may vary.

The information in the table is based on members being reimbursed 75 per cent of approved costs which typically include student administration fees, purchase of compulsory text books required for the course, and either a HECS cost or tuition fees.

Note also that reimbursement rates for approved studies are capped depending on the type of course.

The second table details the various benefits that may be gained through the CTAS, whether out-of-pocket expenses are allowable tax deductions, and whether benefits received are FBT-reportable.

Examples:
The following examples demonstrate the potential impact of an FBT-reportable benefit on the gross income of a serving member.

Example 1:
This example relates to a member approved to study under DASS.

The member pays HECS of $750 and student administrative fees of $250, totalling $1000.

After completing the approved study, the member is reimbursed 75 per cent of the $1000 – HECS reimbursed $563, student administration fees reimbursed $187, totalling $750.

Had the member not been reimbursed the $187, the member could have claimed it as a tax deduction. However, because Defence reimbursed the member, effectively Defence can claim the $187 as a tax deduction (For those familiar with tax rules, this is the “otherwise deductible” rule). Therefore, the taxable value of the benefit is $750 minus $187, ie $563.

FBT is payable (by Defence) on the $563 at the FBT rate of 48.5 per cent (0.485).

The grossed up taxable value is $563 x 1/(1 - FBT rate) that is $563 x 1/(1 - 0.485) . This equals $1093.

The FBT payable by Defence is $1093 x 0.485, ie $530.

The member’s reportable fringe benefits amount will include the FBT ($530) plus the taxable value of the benefit ($563). This might affect child support payments or Centrelink-paid benefits (refer to the list of surcharges and income tests for certain government benefits). However, the member will not be required to pay additional tax.

Example 2:
This example relates to a member approved to undertake Career Transition Training costing $3000 and associated travel costing $1000. The taxable value of the benefit is $4000.

FBT is payable (by Defence) on the $4000 at the FBT rate of 48.5 per cent (0.485).

The grossed up taxable value is $4000 x 1/(1 - FBT rate), that is $4000 x 1/(1 - 0.485) . This equals $7767. The FBT payable by Defence is $7767 x 0.485, ie $3767. The member’s reportable fringe benefits amount will be the FBT ($3767) plus the total benefit paid ($4000).

This might affect child support payments or Centrelink-paid benefits (refer to the list of surcharges and income tests for certain government benefits). However, the member will not be required to pay additional tax.

These examples demonstrate the need for members to seek assistance from their accountant and advice from Centrelink to identify the implications of receiving benefits under the DASS or the CTAS.

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