The Tax Office will force its workers who fail their employer-sponsored uni courses to pay full tuition fees.
But even a pass mark may not be enough to save tax officials from a hefty uni bill, under a proposal from Commissioner of Taxation Chris Jordan.
Payments could be limited only to those public servants who score a credit for their uni work and in some cases only a distinction would be good enough to get the bosses to help pay for the course.
The commissioner also wants to cap the amount it would pay to the many ATO employees who take on extra study in accounting, business, economics, IT or law each year to just $500 per course.
The Tax Office says the proposed changes to its Tuition Assistance Program (TAP) will help the money assigned to the program go further and to help more of its public servants.
But one workplace union described the move as an "outrageous decision" that will deter workers from trying to improve their qualifications and "destroy incentives for tertiary studies".
An ATO spokesperson said the education program had recently been reviewed using the experiences of staff who had used it to further their education and considering "best practice in other organisations".
"Staff feedback indicated a need for greater scope and spread for the program," the spokesperson said.
"The ATO has not yet made a decision on changes to the program as we are committed to seeking input from a broad range of our staff to help inform our final decision."
The spokesperson said the proposed "co-contribution" would help to stretch the program's budget further, allowing more ATO public servants to participate.
"Proposed changes include introducing a co-contribution scheme from 2017, which would see the ATO reimburse approved staff a set amount for each successfully completed course or qualification under the approved course of study," the spokesperson said.
"This approach would see the ATO's annual budget for financial assistance spread across a larger number of recipients.
"We are reviewing feedback received from staff on the proposed changes.
"Responses received over the last two weeks indicate the majority of staff support the proposal for a co-contribution scheme and welcome the broadened suggested course list."
But the Australian Services Union had a different view of the proposed changes, with union official Jeff Lapidos offering a blunt assessment in a bulletin to his members at the ATO.
"Commissioner Jordan wants to destroy incentives for tertiary studies," Mr Lapidos wrote.
"The Commissioner's decision is likely to deter some ATO employees from pursuing tertiary studies, especially those who are having difficulty balancing their household budget and need the reimbursement to keep on top of their finances through the course. "
The union says it will now take its opposition to changes to the education scheme into the protracted talks on the ATO's new enterprise agreement.
