James Gore a Partner at Ernst & Young in a social media posting on Facebook informed his friends and followers that as of January 2019 there will be no tax rebates for education expenses. Gore explained that tax rebates are “claims for qualified expenses paid for your dependents from your after tax salary”. For this reason, Gore advised readers to identify these expenses and arrange salary sacrifice arrangements with the employer.
For those unfamiliar with tax rebates, the situation prior to this announcement in general terms is that a tax payer could get a refund for education expenses paid for a claimed dependent. As the payments were made after tax deductions from the salary, a taxpayer could make an application for this refund to get a portion of the funds back as rebates.
Chief Office Member for NASFUND Charlie Gilchibi commented that this policy change would greatly affect public servants due to the fact that the Department of Personnel Management currently has no policy on salary sacrifice. This would obviously make the salary sacrificed proposal made by Gore even more problematic or impossible.
The policy change obviously leaves very little option for taxpayers but to directly deal with their employer in order to make salary sacrifice arrangements.
But the problem gets even more complicated as some employers do not have any salary sacrifice arrangements in place or if they do have, some employers only accept such an arrangement to take effect on the employee having spent a minimum of two years in employment with that employer.
For those who will not be able to come up with a salary sacrifice arrangement, the result is that they will have to pay education expenses from their after-tax salary but still be unable to claim rebate of these expenses.
One option that taxpayers unable to come to an arrangement with their employer on salary sacrifice is the possibility of joining a contributor’s savings and loans society like the National Contributors Savings & Loans Society a sister company of NASFUND. By contributing directly towards this or a similar society it is possible to make some savings here and make withdrawals for payments of education expenses as and when due. We do acknowledge that we have not thoroughly explored the tax implication of it but the fact that contributions are taken before any deduction of income tax would make it a logical avenue to explore. We will check this area further and provide an update.