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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 (currently 49%).

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 because..

If the student does not provide their tax file number, then the maximum taxation rate (currently 49%) 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).