Study assistance for an employee falls within the definition of an ‘expense payment fringe benefit' where the employer:
- reimburses the employee for expenses incurred by the employee or an associate of the employee, or
- pays a third party in satisfaction for expenses incurred by an employee or an associate of the employee.
The taxable value of an expense payment fringe benefit is the amount of the payment or reimbursement made by the employer less any employee contributions made by the employee.
The taxable value of the benefit may be further reduced by the percentage declared by the employee as ‘otherwise deductible’. A benefit is ‘otherwise deductible' if the employee would have been entitled to claim an income tax deduction had the employee (rather than the employer) paid for the expense. In this case, where the employee declares the otherwise deductible percentage as 100%, the taxable value of the benefit may be reduced to nil.
The ‘otherwise deductible rule’ will not apply where a study assistance reimbursement relates to a Higher Education Contribution Scheme- Higher Education Loan Program (HECS-HELP) debt of an employee, or to a course that is Commonwealth Supported. While there may be a direct nexus with the employee’s employment, the ‘otherwise deductible rule’ will not apply as a tax deduction for the payment or reimbursement of tuition fees under HECS-HELP is specifically denied under the Income Tax Assessment Act 1997, as is the payment or reimbursement of up-front contributions for Commonwealth Supported courses.