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Document Tax withholding under MRCAETS

Under MRCAETS, students are not required to provide their TFN, however if they do not provide a TFN then the maximum rate of taxation must be withheld from their education allowance.

DVA is required under tax law to withhold tax deductions from the education allowance provided to students aged 16 years and over and who are not MRCAETS orphans*. As with VCES, the total annual education allowance paid under MRCAETS is less than the annual tax free threshold and so DVA may withhold nil tax where a student requests DVA apply the tax-free threshold to their education allowance.

If the student does not provide their tax file number, then the maximum taxation rate must be withheld.

If the student does provide their tax file number but does not elect to apply the tax-free threshold to their education allowance, then the minimum tax that must be withheld is calculated using the tax rate tables provided by the Australian Taxation Office

* Note: Under s.52-114 of the Income Tax Assessment Act 1997, in particular item 16 of the Table in that section, a payment under the MRCAETS to an eligible young person who is an orphan (see s.258(1)(b)MRCA) is tax-exempt as it is "a payment because of a person's death" under s.258 MRCA (provision under which the MRCAETS is made).