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2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EDUCATION LEGISLATION AMENDMENT (OVERSEAS
DEBT RECOVERY) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Education and Training,
the Honourable Christopher Pyne MP)
EDUCATION LEGISLATION AMENDMENT (OVERSEAS
DEBT RECOVERY) BILL 2015
OUTLINE
This Bill implements the 2015-16 Budget measure to extend the Higher
Education Loan Programme (HELP) and Trade Support Loan (TSL)
repayment framework to debtors residing overseas.
The main purpose of this Bill is to amend the Higher Education Support Act
2003 (HESA) and the Trade Support Loans Act 2014 (TSL Act) to allow for
the recovery of HELP and TSL debts from debtors who are residing overseas.
The Bill will impose the same repayment obligations on Australians living
overseas as apply to those who reside in Australia, ensuring fairer and more
equitable arrangements.
For these debtors, the Bill creates an obligation to make repayments on their
HELP and TSL debts based on their total Australian and foreign-sourced
income, known as their worldwide income. This will be imposed as a levy
through the Student Loans (Overseas Debtors Repayment Levy) Bill 2015.
Only those debtors living overseas and earning above the minimum HELP
and TSL repayment thresholds will be required to make payments towards
their HELP and TSL debts. Repayment rates and thresholds will mirror those
applying to debtors residing in Australia.
The new arrangements will apply from the later of 1 January 2016 and the day
after this Act receives the Royal Assent. From this date, debtors going
overseas for more than six months (183 days) will be required to register with
the Australian Taxation Office (ATO), while those already living overseas will
have until 1 July 2017 to register. Repayment obligations will commence from
1 July 2017, for income earned in the 2016-17 financial year.
Schedule 1 amends HESA to allow for the recovery of HELP debts from
debtors who are residing overseas.
Schedule 2 amends the TSL Act to allow for the recovery of TSL debts from
debtors who are residing overseas.
Schedule 3 amends HESA to allow the Secretary of the Department of
Education and Training to access tax file numbers for HELP debtors. This is
designed to improve data quality and the efficiency of data exchange with the
ATO, which will support more effective administration of overseas debt
recovery and HELP more generally.
1
Schedule 4 amends Schedule 1 to the Taxation Administration Act 1953 to
allow a taxation officer to disclose taxpayers' contact and income information
to a foreign government agency of a foreign country, or part of a foreign
country, in order to assist that foreign government agency to identify people
with student loan repayment obligations living in Australia and potentially
recover outstanding student loan amounts.
Schedule 5 includes consequential amendments to the Income Tax
Assessment Act 1936 and the Income Tax Assessment Act 1997 to ensure
that overseas HELP or TSL debt repayments are not allowable self-education
expenses for Australian income tax purposes.
2
FINANCIAL IMPACT STATEMENT
The measures in the Bill are estimated to save more than $25 million between
2015-16 and 2018-19, and more than $150 million over 10 years, in fiscal
balance terms.
3
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011
EDUCATION LEGISLATION AMENDMENT (OVERSEAS DEBT
RECOVERY) BILL 2015
This Bill is compatible with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of the Human
Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
The main purpose of the Bill is to amend the Higher Education Support Act
2003 (HESA) and the Trade Support Loans Act 2014 (TSL Act) to create a
repayment obligation for those debtors who are not Australian taxpayers, but
who are earning above the equivalent of the Australian repayment threshold.
The Bill also includes minor amendments to taxation legislation to provide for
data exchange to support overseas student loan debt recovery.
The amendments in Schedule 4 provide an additional exception to the rule
that a taxation officer (defined as the Commissioner of Taxation, a Second
Commissioner or an individual appointed or engaged under the Public Service
Act 1999 and performing duties in the Australian Taxation Office) must not
disclose taxpayers' information (known as protected information).
The exception allows a taxation officer to disclose taxpayers' protected
contact information to a foreign government agency (of a foreign country, or
part of a foreign country, or an entity acting on their behalf), so that the foreign
government agency, or entity acting on their behalf, can contact a person with
a student loan which was made by, or on behalf of, that agency (or another
foreign government agency of, or part of, that country). The disclosure must
be for the purposes of contacting the person and recovering outstanding
student loan amounts.
Human Rights Implications
The Bill could be perceived as having minor human rights implications in
relation to the right to freedom of movement, the right to equality and non-
discrimination and the right to privacy and reputation outlined in the
International Covenant on Civil and Political Rights (ICCPR). The Bill may
also have perceived implications for the right to an adequate standard of living
found in the International Covenant on Economic, Social and Cultural Rights
(ICESCR).
4
The right to freedom of movement is found in Article 12 of the ICCPR. The Bill
may be perceived to limit this right. By creating the obligation to make
repayments while overseas, it may be seen as placing financial barriers on
those who wish to leave the country. This is not considered a practical
limitation, as any financial imposition would only affect those earning more
than the Australian minimum repayment income, and would not impact low
income earners, or those without incomes.
This Bill has potential implications for the right to equality and non-
discrimination, found in Articles 2, 12 and 26 of the ICCPR. By extending
repayment obligations to include debtors who move overseas, the Bill ensures
debtors who remain in Australia are not treated inequitably. The Bill does not
limit the right to non-discrimination in any way.
The amendments in Schedule 4 enable sharing of taxation data for the
purpose of student loan debt administration, and to allow the Department of
Education and Training (the Department) to access students' tax file numbers
(TFNs) to support data improvement. While there may be concerns that these
amendments have the potential to compromise student and debtor privacy,
this data sharing will only be allowed in specific circumstances and for
confined and specific purposes. The change to enable the Department to
access TFNs is merely an extension of current processes that apply for Trade
Support Loans. The change to allow limited data sharing with other countries
will allow Australia to participate in reciprocal debt recovery arrangements
with these countries, consistent with good international practice.
Article 17 of the ICCPR says that individuals shall not be subject to unlawful
or arbitrary interference with their privacy. While the United Nations Human
Rights Committee states that arbitrary interference with privacy extends to
interference provided for under the law, it also provides that where the
interference is reasonable in the circumstances and in accordance with the
aims and objectives of the ICCPR, the interference will not be considered
arbitrary.
The disclosure of information by a taxation officer to a foreign government
agency of a foreign country, or part of a foreign country, or an entity acting on
behalf of such an agency, is necessary, as it would otherwise be difficult or
impossible for the foreign government agency of a foreign country, or part of a
foreign country, or entity acting on behalf of such an agency, to locate
individuals with outstanding loans and pursue the legitimate objective of
recouping amounts that these individuals agreed to repay.
The disclosure of address, contact and income information is connected to
that objective because it will enable the relevant foreign government agency
to locate the individual and ascertain their repayment obligations (given that
the repayment of student loans is contingent on income). It is envisaged that
the arrangements with foreign government agencies will generally be
reciprocal and Australia will similarly benefit from the identification of
Australian student loan debtors and potential repayment of those loans.
5
The disclosure of address, contact and income information is proportionate to
this specific purpose, and the parties are required to use appropriate
safeguards to ensure the confidentiality of the information. For example,
section 355-155 of Schedule 1 to the Taxation Administration Act 1953
prohibits the on-disclosure of protected information.
Furthermore, in providing information to assist a foreign government agency
to recover outstanding student loans, the amendments will help promote the
purposes of Article 9 of the ICESCR, which recognises the right of everyone
to social security, including tertiary funding. In fulfilling this obligation, public
authorities are required to take responsibility for the effective administration of
the system. In assisting these student loans to be repaid and ensuring the
integrity and accessibility of funding for the tertiary education systems of
affected foreign countries, this measure also helps to further the right to
education, captured in Article 13 of ICESCR.
Additionally, the Bill interacts with, but does not limit, the right to an adequate
standard of living found in Article 11 of the ICESCR. While the measures in
this Bill may reduce a person's disposable income, and therefore a person's
standard of living, repayment obligations would only apply to those earning
above the Australian minimum repayment threshold. A person who was not
earning income, or who was earning a low income, would not be faced with
any requirement to repay.
Conclusion
This Bill is compatible with human rights because, to the extent that it may
limit human rights, the limitations are reasonable, necessary and
proportionate.
6
EDUCATION LEGISLATION AMENDMENT (OVERSEAS DEBT
RECOVERY) BILL 2015
NOTES ON CLAUSES
Clause 1 - Short title
Clause 1 provides for the Act to be cited as the Education Legislation
Amendment (Overseas Debt Recovery) Act 2015.
Clause 2 - Commencement
Subclause 2(1) inserts a three column table setting out commencement
information for various provisions in the Bill. Each provision of the Bill
specified in column 1 of the table commences (or is taken to have
commenced) in accordance with column 2 of the table and any other
statement in column 2 has effect according to its terms.
Sections 1 to 3 and anything else in the Act not otherwise covered by the
table commence on the day the Act receives the Royal Assent.
The following provisions commence on the later of the day after the Act
receives the Royal Assent and 1 January 2016:
Schedule 1
items 1 to 3 of Schedule 2
items 6 to 10 of Schedule 2
Schedule 3
Schedule 5.
Item 4 of Schedule 2 commences on the later of the day after the Act receives
the Royal Assent and 1 January 2016. If item 124 of Schedule 2 to the Social
Services and Other Legislation Amendment (Student Measures) Bill 2015
commences before the day after this Act receives the Royal Assent, then item
4 of Schedule 2 will not commence at all.
Item 5 of Schedule 2 commences on the later of immediately after Schedule 1
commences and immediately after item 124 of Schedule 2 to the Social
Services and Other Legislation Amendment (Student Measures) Bill 2015
commences. If item 124 of Schedule 2 to the Social Services and Other
Legislation Amendment (Student Measures) Bill 2015 does not commence,
then item 5 of Schedule 2 will not commence at all.
Schedule 4 commences on the day this Act receives the Royal Assent.
Any information in column three of the table is not part of the Act.
A note explains that the commencement times in the table will not be
amended should the provisions of this Act be amended by any future Act.
7
Clause 3 - schedule(s)
Clause 3 provides that any legislation that is specified in a schedule is
amended or repealed as set out in the applicable items in the schedule and
that any other item in a schedule has effect according to its terms.
List of abbreviations
ATO Australian Taxation Office
HELP Higher Education Loan Programme
HECS Higher Education Contribution Scheme
HESA Higher Education Support Act 2003
ITAA 1936 Income Tax Assessment Act 1936
ITAA 1997 Income Tax Assessment Act 1997
TAA 1953 Taxation Administration Act 1953
TFN Tax file number
TSL Trade Support Loan
TSL Act Trade Support Loans Act 2014
8
Schedule 1 Repayment of
accumulated HELP debts by overseas
debtors
Summary
Schedule 1 imposes the same repayment obligations on Australians living
overseas with a HELP debt as currently apply to those who reside in
Australia, ensuring fairer and more equitable arrangements. The obligation
will be applied through the Student Loans (Overseas Debtors Repayment
Levy) Bill 2015.
Overseas HELP debtors who are non-residents for taxation purposes (foreign
residents) will be required to assess their Australian and their foreign-sourced
income (their worldwide income) within an income year. If the person's
assessed worldwide income for the income year exceeds the minimum HELP
repayment income threshold for the income year, the overseas debtor is liable
to make a repayment. Overseas repayments will flow through to a reduction to
an individual's accumulated HELP debt.
Additionally, Schedule 1 provides that HELP debtors who leave Australia for
more than six months (183 days) after the Schedule commences will be
required to register with the ATO, while those already overseas for six months
or more will have until 1 July 2017 to register. Failure to notify the ATO in the
above situations will constitute a failure to comply with taxation requirements.
The change will commence on the later of 1 January 2016 and the day after
this Act receives the Royal Assent, with the first compulsory repayments to be
made from 1 July 2017 (for the 2016-17 income year).
Schedule 1 also provides for associated guidelines to be made under section
238-10 of HESA to prescribe administrative arrangements, including the
provision of income details and conversions of foreign income to Australian
currency.
Background
The introduction of repayment obligations for overseas HELP debtors is part
of the Government's broader agenda to improve the equity and sustainability
of HELP. Under Division 154 of HESA, there is currently no obligation for
those who are non-residents for tax purposes and do not have
Australian-sourced income to make income-contingent repayments towards
their HELP debt.
9
Under Division 151 of HESA, debtors are allowed to make voluntary
payments to the ATO at any time. All debtors have a payment reference
account number which can be easily accessed through the ATO and there is
a range of payment options, including electronic banking, credit cards, and
cheque. However, while all overseas debtors are currently able to make
voluntary repayments using any of these options, foreign residents are not
required to submit an Australian tax return (unless they have sufficient
Australian-sourced income) and are therefore not under any legal obligation to
repay their HELP debts.
Detailed explanation
Part 1 - Amendments
Higher Education Support Act 2003
Item 1
Item 1 inserts a new section 148-3 into Part 4-2 of HESA (discharge of
indebtedness) to provide that repayments by foreign residents are also dealt
with in the Overseas Debtors Repayment Guidelines and that the provisions
of Part 4-2 indicate when matters are or may be dealt with in those
Guidelines.
A note explains that the Overseas Debtors Repayment Guidelines are made
by the Minister under section 238-10 of HESA.
Item 9 inserts a definition of foreign resident into the dictionary at Schedule 1
to HESA. Under this definition, foreign resident carries the same meaning as
that provided for in subsection 995-1(1) of the ITAA 1997 - i.e. a foreign
resident is a person who is not a resident of Australia for the purposes of the
ITAA 1936.
Item 2
Item 2 inserts a new Subdivision 154-AA (liability of overseas debtors to repay
amounts) into HESA, consisting of the following new sections:
section 154-16 (liability of overseas debtors to repay amounts)
section 154-17 (assessed worldwide income)
section 154-18 (notices to be given to the Commissioner of Taxation).
Section 154-16
Section 154-16 provides that a person is liable to pay the Commonwealth a
levy of the amount calculated under new section 154-32 (see item 3) if:
the person is a foreign resident during an income year; and
10
the person's assessed worldwide income for the income year
exceeds the minimum repayment income for the income year; and
on the first of June immediately before an assessment is made of the
person's income for that income year, the person had an accumulated
HELP debt.
A note explains that any amount a person is liable to pay under section
154-16 is imposed as a levy under the Student Loans (Overseas Debtors
Repayment Levy) Act 2015.
As noted above, item 9 inserts a definition of foreign resident into the
dictionary at Schedule 1 to HESA. Under this definition, foreign resident
carries the same meaning as that provided for in subsection 995-1(1) of the
ITAA 1997 - i.e. a foreign resident is a person who is not a resident of
Australia for the purposes of the ITAA 1936.
According to the dictionary at Schedule 1 to HESA, income year has the
meaning given by subsection 995-1(1) of the ITAA 1997 which, in most cases,
will be a financial year.
Assessed worldwide income is defined in new section 154-17.
The dictionary at Schedule 1 to HESA provides that minimum repayment
income has the meaning given by section 154-10 of HESA.
Section 154-17
Subsection 154-17(1) provides that a person's assessed worldwide income
for an income year is an amount equal to the person's repayment income for
the income year plus their foreign-sourced income for the income year
converted into Australian currency.
The dictionary at Schedule 1 to HESA provides that repayment income has
the meaning given by section 154-5 of HESA which is an amount equal to the
sum of the following amounts:
the person's taxable income for the income year; and
the person's net investment loss for the income year; and
any reportable fringe benefits for the income year (for those persons
who are employees within the meaning of the Fringe Benefits Tax
Assessment Act 1986); and
the person's exempt foreign income for the income year; and
the person's reportable superannuation contributions for the income
year.
As noted above, item 9 inserts a definition of foreign resident into the
dictionary at Schedule 1 to HESA, which has the same meaning as that
provided for in subsection 995-1(1) of the ITAA 1997 - i.e. a person who is
not a resident of Australia for the purposes of the ITAA 1936.
11
Subsection 154-17(2) provides that the Overseas Debtors Repayment
Guidelines may provide for how to work out a person's foreign-sourced
income for an income year, including how to convert it into Australian
currency. If the Guidelines do not make such provision, then the
Commissioner will work out the amount in the course of administering the
provision.
Subsection 154-17(3) provides that, without limiting paragraph 154-17(1)(b),
the Overseas Debtors Repayment Guidelines may provide for a person's
foreign-sourced income for an income year to be worked out for a period that
does not correspond to that income year. This is designed to allow for the
future possibility of simplifying the process for users by using income tax
assessments undertaken in other countries, which may relate to different
periods that do not precisely correspond to an Australian financial year.
Section 154-18
Subsection 154-18(1) requires those persons with an accumulated HELP
debt, or who otherwise have a HELP debt that has not yet been discharged,
and who leave Australia (other than in circumstances set out in the Overseas
Debtors Repayment Guidelines) with the intention of being away for at least
183 days, to notify the Commissioner of Taxation, in the approved form,
within seven days of leaving the country.
Subsection 154-18(2) requires those persons with an accumulated HELP
debt, or who otherwise have a HELP debt that has not yet been discharged,
and who have been outside of Australia for at least 183 days in any 12 month
period (other than in circumstances set out in the Overseas Debtors
Repayment Guidelines), and were not required to notify the Commissioner of
Taxation under subsection 154-18(1), to notify the Commissioner, in the
approved form, within seven days after the end of the 183 days.
Subsection 154-18(3) provides that persons who are foreign residents and
have an accumulated HELP debt on the first of June immediately preceding
an income year must (other than in circumstances set out in the Overseas
Debtors Repayment Guidelines) give the Commissioner of Taxation a notice,
in the approved form, relating to their income (including foreign-sourced
income) for the income year. That notice must be given within the timeframe
specified in the form. A note explains that the Commissioner may defer the
time for giving the return (see section 388-55 of Schedule 1 to the TAA 1953).
Subsection 154-18(4) states that the Overseas Debtors Repayment
Guidelines may provide for the content of notices under this section.
Item 3
Item 3 inserts a new section 154-32 into HESA (amounts payable to the
Commonwealth by overseas debtors) which provides that the amount of levy
that a person is liable to pay to the Commonwealth under section 154-16 in
respect of an income year is the difference between the following:
12
the amount the person would have been liable to pay under section
154-1 (liability to repay amounts) if he or she had a repayment income
for the income year that equals the person's assessed worldwide
income for the income year and subsection 154-1(2) does not apply to
the person (subsection 154-1(2) provides that there is no liability to
repay amounts under that section if, under section 8 of the Medicare
Levy Act 1986, the person does not have to pay the Medicare levy on
their taxable income for the income year, or the amount of the
Medicare levy payable by the person on his or her taxable income is
reduced); and
the amount (if any) that the person is required to pay under section
154-1 for the income year.
This will ensure any repayment made through the Australian taxation system
is discounted from the overseas repayment obligation.
Item 4
Section 154-35 of HESA provides that the Commissioner of Taxation may
make assessments of a person's accumulated HELP debt and the amount the
person is required to pay under section 154-1. Item 4 amends paragraph
154-35(b) to also insert reference to amounts the person has to pay under
new section 154-16.
Item 5
Item 5 inserts a new section 154-90 (failures to comply with section 154-18)
into Subdivision 154-D of HESA (application of tax legislation). New section
154-90 provides that Part III of the TAA 1953 applies where there has been a
failure to comply with new section 154-18 (notices to be given to the
Commissioner of Taxation) as if section 154-18 were a taxation law.
This is designed to ensure that the ATO can administer these arrangements
in line with broader provisions for administering HELP and taxation
arrangements, with the capacity to apply a similar range of penalties as can
be applied for tax purposes.
Item 6
The table in section 238-10 sets out those guidelines that the Minister may
make under HESA. Item 6 adds a new item 4B to that table - Overseas
Debtors Repayment Guidelines (under Part 4-2 of HESA).
13
Item 7
Item 7 inserts a definition of assessed worldwide income into the dictionary
at Schedule 1 to HESA to read as follows:
assessed worldwide income has the meaning given by section
154-17.
Item 8
Item 8 amends the definition of compulsory repayment amount in the
dictionary at Schedule 1 to HESA so that it reads as follows:
compulsory repayment amount means an amount that:
(a) is required to be paid in respect of an * accumulated HELP
debt under section 154-1 or 154-16; and
(b) is included in a notice of an assessment made under
section 154-35.
Item 9
Item 9 inserts a definition of foreign resident into the dictionary at Schedule 1
to HESA to read as follows:
foreign resident has the meaning given by subsection 995-1(1) of the
Income Tax Assessment Act 1997.
14
Part 2 - Application provisions
Item 10
Item 10 is an application provision and provides that, except as provided by
Part 2 of this Schedule, the amendments in the Schedule apply in relation to
the 2016-17 income year and also to later income years.
Item 11
Item 11 is also an application provision.
Subitem 11(1) ensures that new subsections 154-18(1) and (2), relating to the
provision of notices to the Commissioner of Taxation, apply to people leaving
Australia after item 11 commences (i.e. after the later of the day after this Bill
(once enacted) receives the Royal Assent or 1 January 2016) and, except as
otherwise noted in subitem 11(2), to those persons already outside of
Australia immediately before commencement.
Subsection 154-18(1) requires those persons with an accumulated HELP
debt, or who otherwise have a HELP debt that has not yet been discharged,
and who leave Australia (other than in circumstances set out in the Overseas
Debtors Repayment Guidelines) with the intention of being away for at least
183 days, to notify the Commissioner of Taxation, in the approved form,
within seven days of leaving the country.
Subsection 154-18(2) requires those persons with an accumulated HELP
debt, or who otherwise have a HELP debt that has not yet been discharged,
and who have been outside of Australia for at least 183 days in any 12 month
period (other than in circumstances set out in the Overseas Debtors
Repayment Guidelines), and were not required to notify the Commissioner of
Taxation under subsection 154-18(1), to notify the Commissioner, in the
approved form, within seven days after the end of the 183 days.
Subitem 11(2) extends the timeframe for a person to give notice to the
Commissioner of Taxation under new subsection 154-18(2), if the person was
outside Australia immediately before commencement and had been outside of
Australia for at least 183 days within a period of 12 months. The person is
required to notify the Commissioner no later than 1 July 2017. This will allow
these debtors sufficient time to make contact with the ATO and for the
Government to engage them through communication strategies.
However, should they subsequently return and leave Australia, their absence
would restart and be treated in line with the more general requirements
applying under section154-18 i.e. seven days if they leave with the intention of
being away for 183 days or, if they do not intend to be away that long, within
seven days of the 183 day period elapsing. The Overseas Debtors Guidelines
may set out circumstances where such individuals are not required to notify
the Commissioner.
15
Schedule 2 Repayment of
accumulated TSL debts by overseas debtors
Summary
Schedule 2 imposes the same repayment obligations on Australians living
overseas with a TSL debt as currently apply to those who reside in Australia,
ensuring fairer and more equitable arrangements. The obligation will be
applied through the Student Loans (Overseas Debtors Repayment Levy) Bill
2015.
Overseas TSL debtors who are non-residents for taxation purposes (foreign
residents) will be required to assess their Australian and their foreign-sourced
income (their worldwide income) within an income year. If the person's
assessed worldwide income for the income year exceeds the minimum TSL
repayment income threshold for the income year, the overseas debtor will be
liable to make a repayment. Overseas repayments will flow through to a
reduction of an individual's accumulated TSL debt.
Additionally, Schedule 2 provides that TSL debtors who leave Australia for
more than six months after the Schedule commences, will be required to
register with the ATO, while those already overseas for six months or more
will have until 1 July 2017 to register. Failure to notify the ATO in the above
situations will constitute a failure to comply with taxation requirements.
The change will commence on the later of 1 January 2016 and the day after
this Act receives the Royal Assent, with the first compulsory repayments to be
made from 1 July 2017.
Background
Under Division 4 of Part 3.2 of the TSL Act (discharging debts) there is
currently no obligation for persons who are non-residents for tax purposes
and do not have Australian-sourced income to make income-contingent
repayments towards their TSL debt.
Under Division 3 of Part 3.2 of the TSL Act (accumulated TSL debts) debtors
are allowed to make voluntary payments to the ATO at any time. All debtors
have a payment reference account number which can be easily accessed
through the ATO and there is a range of payment options, including electronic
banking, credit cards, and cheque. However, while all overseas debtors are
currently able to make voluntary repayments using any of these options,
foreign residents are not required to submit an Australian tax return (unless
they have sufficient Australian-sourced income) and are therefore not under
any legal obligation to repay their TSL debts.
16
Detailed explanation
Part 1 - Amendments
Trade Support Loans Act 2014
Item 1
Item 1 inserts a definition of assessed worldwide income in section 5 of the
TSL Act to read as follows:
assessed worldwide income has the meaning given by section
47B.
Item 2
Item 2 amends the definition of compulsory TSL repayment amount in
section 5 of the TSL Act so that it reads as follows:
compulsory TSL repayment amount means an amount that:
(a) is required to be paid in respect of an accumulated TSL debt
under section 46 or 47A; and
(b) is included in a notice of assessment made under section
48.
Item 3
Item 3 inserts a definition of foreign resident in section 5 of the TSL Act to
read as follows:
foreign resident has the meaning given by subsection 995-1(1) of the
Income Tax Assessment Act 1997.
Item 4
Pursuant to subsection 46(1) of the TSL Act, where a person's repayment
income for an income year exceeds the minimum repayment income for the
income year and on the first of June immediately preceding an assessment of
their income for that income year they had an accumulated TSL debt - the
person is liable to pay to the Commonwealth an amount calculated under the
following formula:
Applicable percentage of repayment income - HELP liability
Subsection 46(1) defines applicable percentage of repayment income as
the percentage amount of the person's repayment income applicable under
the table in section 154-20 of HESA.
17
Subsection 46(1) defines HELP liability as being any amount the person has
to pay under section 154-1 of HESA for the income year for an accumulated
HELP debt.
Item 4 amends the definition of HELP liability so that HELP liability means
the sum of any amounts the person has to pay under sections 154-1 or
154-16 of HESA for the income year for an accumulated HELP debt.
Item 5
Item 124 of Schedule 2 to the Social Services and Other Legislation
Amendment (Student Measures) Bill 2015 (Student Measures Bill) includes
consequential amendments to the TSL Act to address the interaction of TSL
repayment arrangements with the relevant social security legislation.
This item 5 amends paragraph (a) of the definition of relevant income-
contingent loans liability under subsection 46(1) of the TSL Act as
amended by the Student Measures Bill to ensure this definition also includes
overseas debt repayment obligations. Pursuant to the amendment, the
relevant amount under paragraph (a) of that definition is the sum of any
amounts the person is liable to pay under section 154-1 or 154-16 of HESA
for the income year in respect of an accumulated HELP debt.
Item 5 commences on the later of immediately after Schedule 1 commences
and immediately after item 124 of Schedule 2 to the Student Measures Bill
commences. If item 124 of Schedule 2 to the Student Measures Bill does not
commence, then item 5 will not commence at all.
Item 6
Item 6 inserts a new Subdivision AA of Division 4 of Part 3-2 (liability of
overseas debtors to repay amounts) into the TSL Act, consisting of the
following new sections:
section 47A (liability of overseas debtors to repay amounts)
section 47B (assessed worldwide income)
section 47C (notices to be given to the Commissioner of Taxation).
Section 47A
Subsection 47A(1) provides that a person is liable to pay to the
Commonwealth, in accordance with Division 4, a levy of the amount
calculated under new subsection 47A(2) if:
the person is a foreign resident during an income year; and
the person's assessed worldwide income for the income year
exceeds the minimum repayment income for the income year; and
on the first of June immediately before an assessment is made of the
person's income for that income year, the person had an accumulated
TSL debt.
18
A note explains that any amount a person is liable to pay under section 47A is
imposed as a levy under the Student Loans (Overseas Debtors Repayment
Levy) Act 2015.
As noted above, item 3 inserts a definition of foreign resident into section 5.
Under this definition, foreign resident carries the same meaning as that
provided for in subsection 995-1(1) of the ITAA 1997 - i.e. a foreign resident
is a person who is not a resident of Australia for the purposes of the ITAA
1936.
Section 5 of the TSL Act defines income year as having the meaning given
by subsection 995-1(1) of the ITAA 1997 which, in most cases, will be a
financial year.
Item 1 inserts a definition of assessed worldwide income into section 5 of
the TSL Act - i.e. as defined in new section 47B.
Section 5 defines minimum repayment income as having the same meaning
as in HESA - i.e. as given by section 154-10 of HESA.
Subsection 47A(2) provides that the amount of levy that a person is liable to
pay to the Commonwealth under section 47A in respect of an income year is
the difference between the following:
the amount the person would have been liable to pay under section 46
(liability to repay amounts) if he or she had a repayment income for the
income year that equals the person's assessed worldwide income for
the income year and subsection 46(3) does not apply to the person
(subsection 46(3) provides that there is no liability to repay amounts
under section 46 if, under section 8 of the Medicare Levy Act 1986, the
person does not have to pay the Medicare levy on their taxable income
for the income year, or the Medicare levy payable by the person on his
or her taxable income for the income year is reduced); and
the amount (if any) that the person is required to pay under section 46
in respect of the income year.
This is to ensure that any repayment made through the Australian taxation
system is discounted from the overseas payment obligation.
Section 47B
Subsection 47B(1) provides that a person's assessed worldwide income for
an income year is an amount equal to the person's repayment income for
the income year plus their foreign-sourced income for the income year
converted into Australian currency.
Section 5 defines repayment income as having the meaning given by HESA
(i.e. the meaning in section 154-5 of HESA) which is an amount equal to the
sum of the following amounts:
19
the person's taxable income for the income year; and
the person's net investment loss for the income year; and
any reportable fringe benefits for the income year (for those persons
who are employees within the meaning of the Fringe Benefits Tax
Assessment Act 1986); and
the person's exempt foreign income for the income year; and
the person's reportable superannuation contributions for the income
year.
As noted above, item 3 inserts a definition of foreign resident into section 5,
which has the same meaning as that provided for in subsection 995-1(1) of
the ITAA 1997 - i.e. a person who is not a resident of Australia for the
purposes of the ITAA 1936.
Subsection 47B(2) provides that the rules may provide for how to work out a
person's foreign-sourced income for an income year, including how to convert
it into Australian currency. If the rules do not make such provision, then the
Commissioner will work out the amount in the course of administering the
provision.
Subsection 47B(3) provides that, without limiting paragraph 47B(1)(b), the
rules may provide for a person's foreign-sourced income for an income year
to be worked out for a period that does not correspond to that income year.
This is designed to allow for the future possibility of simplifying the process for
users by using income tax assessments undertaken in other countries, which
may relate to different periods that do not precisely correspond to an
Australian financial year.
Section 47C
Subsection 47C(1) requires those persons with an accumulated TSL debt, or
who otherwise have a TSL debt that has not been discharged, and who leave
Australia (other than in circumstances set out in the rules) with the intention of
being away for at least 183 days to notify the Commissioner of Taxation, in
the approved form, within 7 days of leaving the country.
Subsection 47C(2) requires those persons with an accumulated TSL debt, or
who otherwise have a TSL debt that has not been discharged, and who have
been outside of Australia for at least 183 days in any 12 month period (other
than in circumstances set out in the rules), and were not required to notify the
Commissioner of Taxation under subsection 47C(1), to notify the
Commissioner, in the approved form, within seven days after the end of the
183 days.
Subsection 47C(3) provides that persons who are foreign residents and have
an accumulated TSL debt on the first of June immediately preceding an
income year must (other than in circumstances set out in the rules) give the
Commissioner of Taxation a notice (in the approved form) relating to their
income (including foreign-sourced income) for the income year. That notice
20
must be given within the timeframe specified in the form. A note explains that
the Commissioner of Taxation may defer the time for giving the return (see
section 388-55 of Schedule 1 to the TAA 1953).
Subsection 47C(4) states that the rules may provide for the content of notices
under this section.
Item 7
Section 48 of the TSL Act provides that the Commissioner of Taxation may
make assessments of a person's accumulated TSL debt and the amount the
person is required to pay under section 46. Item 7 amends paragraph 48(b) to
also insert reference to amounts the person has to pay under new section
47A.
Item 8
Item 8 inserts a new section 56A into Part 3.3 of Chapter 3 of the TSL Act
(application of tax legislation). New section 56A provides that Part III of the
TAA 1953 applies where there has been a failure to comply with new section
47C (notices to be given to the Commissioner of Taxation) as if section 47C
were a taxation law.Part 2 - Application provisions
Item 9
Item 9 is an application provision and provides that, except as provided by
Part 2 of this Schedule, the amendments in the Schedule apply in relation to
the 2016-17 income year and also to later income years.
Item 10
Item 10 is also an application provision.
Subitem 10(1) ensures that new subsections 47C(1) and (2) relating to the
provision of notices to the Commissioner of Taxation apply to people who
leave Australia after item 10 commences (i.e. after the later of the day after
this Bill (once enacted) receives the Royal Assent, or 1 January 2016) and,
except as otherwise noted in subitem 10(2), to those persons already outside
of Australia immediately before commencement.
Subsection 47C(1) requires those persons with an accumulated TSL debt, or
who otherwise have a TSL debt that has not been discharged, and who leave
Australia (other than in circumstances set out in the rules) with the intention of
being away for at least 183 days to notify the Commissioner of Taxation, in
the approved form, within 7 days of leaving the country.
Subsection 47C(2) requires those persons with an accumulated TSL debt, or
who otherwise have a TSL debt that has not been discharged, and who have
been outside of Australia for at least 183 days in any 12 month period (other
than in circumstances set out in the rules), and were not required to notify the
21
Commissioner of Taxation under subsection 47C(1), to notify the
Commissioner, in the approved form, within seven days after the end of the
183 days.
Subitem 11(2) extends the timeframe for a person to give notice to the
Commissioner of Taxation under new subsection 47C(2), if the person was
outside Australia immediately before commencement and had been outside of
Australia for at least 183 days within a period of 12 months. The person is
required to notify the Commissioner no later than 1 July 2017. This will allow
these debtors sufficient time to make contact with the ATO, and for the
Government to engage them through communication strategies.
However, should they subsequently return and leave Australia, their absence
would restart and be treated in line with the more general requirements
applying under section 47C i.e. seven days if they leave with the intention of
being away for 183 days or, if they do not intend to be away that long, within
seven days of the 183 day period elapsing. The Overseas Debtors Guidelines
may set out circumstances where such individuals are not required to notify
the Commissioner.
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Schedule 3 Tax file numbers
Summary
This Schedule amends HESA to allow the Department to access TFNs for
HELP debtors consistent with arrangements that apply for administering
TSLs. This is accomplished by requiring students to notify the Secretary and
their provider of their TFN upon application for a HELP loan, as well as
through provisions to enable higher education providers and the ATO to
provide TFNs for existing debtors. The aim is to streamline and improve the
efficiency of transmission of data between the Department and the ATO,
which will simplify administration, reduce the potential for fraud and improve
data accuracy and reliability.
Background
Under Division 187 of HESA (the TFN requirements for assistance under
Chapter 3), students are only required to notify the appropriate officer of their
higher education provider, or Open Universities Australia, of their TFN. Under
Division 190 (notification of TFNs), the Commissioner can currently only give
written notice of the TFN of a student to a higher education provider and Open
Universities Australia. This contrasts with arrangements for TSLs, which allow
for the direct provision of TFNs to the Department.
Detailed explanation
Higher Education Support Act 2003
Items 1, 2 and 3
Division 187 of HESA sets out the TFN requirements for assistance under
Chapter 3 (assistance to students). Section 187-1 provides for how students
meet those TFN requirements.
Subsection 187-1(1) concerns assistance other than SA-HELP assistance;
subsection 187-1(1A) concerns assistance other than SA-HELP assistance
accessed through Open Universities Australia; and subsection 187-1(3B)
concerns SA-HELP assistance. Each of these subsections requires students
to notify their TFNs to an appropriate officer of the relevant
provider / Open Universities Australia.
Items 1, 2 and 3 amend these subsections to also require students to notify
their TFNs to the Secretary.
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Items 4 and 5
With respect to assistance other than SA-HELP assistance, paragraphs
187-5(1)(a) and (2)(a) require students to notify their provider or Open
Universities Australia of their TFN within 21 days of it being issued by the
Commissioner of Taxation.
Items 4 and 5 amend these subsections to also require students to notify their
TFNs to the Secretary.
Items 6 to 22
Item 6 amends the heading to Division 190 so that it reads Who can the
Commissioner notify of tax file number matters?
The Commissioner of Taxation can notify a student's higher education
provider or Open Universities Australia (as the case may be) of the student's
TFN in a number of circumstances:
when TFNs are issued (section 190-1)
when TFNs are altered (section 190-5)
when TFNs are incorrectly notified for students with TFNs (section 190-
10)
when TFNs are incorrectly notified for students without TFNs (section
190-15)
when applications for TFNs are refused or cancelled (section 190-20).
Items 7 to 22 amend these sections to also enable the Commissioner to give
the student's TFN or information about the student's TFN (as the case may
be) to the Secretary.
Item 23
This item is a transitional provision and provides that the TFN amendments
made by Schedule 3 to Division 187 of HESA (i.e. items 1 to 5) do not apply
to a student and a course of study if, immediately before Schedule 3
commences (i.e. the later of 1 January 2016 or the day after this Act receives
the Royal Assent), the student met the Division 187 TFN requirements in
relation to a course of study.
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Schedule 4 Confidentiality of
taxpayer information
Summary
Schedule 4 permits the Commissioner of Taxation and other taxation officers
to disclose taxpayers' contact and income information to a foreign government
agency of a foreign country, or part of a foreign country, or an entity acting on
behalf of such an agency, in order to assist that foreign government agency to
identify people with student loan repayment obligations living in Australia and
potentially recover outstanding student loan amounts.
This is achieved by amending the table in subsection 355-65(8) of Schedule 1
to the TAA 1953 to include a new exception to the prohibition against
disclosing protected information acquired as a taxation officer to another
entity.
Comparison of key features of new law and current law
New law Current law
A taxation officer may A taxation officer may
disclose protected taxpayer disclose protected taxpayer
information only in certain information only in certain
circumstances. circumstances.
The law does allow for a The law does not allow for a
taxation officer to disclose taxation officer to disclose
address, contact or income address, contact or income
information to a foreign information to a foreign
government agency (of, or a government agency (of, or a
part of, a foreign country), or part of, a foreign country), or
an entity acting on behalf of an entity acting on behalf of
such an agency, so that the such an agency, so that the
foreign government agency foreign government agency
can contact a person with a can contact a person with a
student loan that was issued student loan that was issued
by, or on behalf of that, or by, or on behalf, of that, or
another, foreign government another, foreign government
agency (of part of, or that, agency (of part of, or that,
foreign country). foreign country), for the
The disclosure must be for purposes of contacting the
the purposes of contacting person, and potentially
the person, and potentially recovering outstanding
recovering outstanding student loan amounts.
student loan amounts.
25
Background
The key objective of Division 355 of Schedule 1 to the TAA 1953 is to protect
the confidentiality of taxpayer information. The rules regarding the disclosure
of this information (called protected information) by the Commissioner and
other taxation officials are strict. Information may only be disclosed when
privacy concerns are outweighed by the public benefit of those disclosures.
This balanced approach encourages taxpayers to provide correct information
to the Commissioner and facilitates efficient and effective government
administration and law enforcement by allowing disclosures of protected
information for specific, appropriate purposes.
Accordingly, subsection 355-25(1) of Schedule 1 to the TAA 1953 provides
that it is an offence if a taxation officer discloses protected information to
another entity. Subsection 355-30(1) provides that protected information is
information that relates to the affairs of an entity, was obtained under or for
the purposes of a taxation law, and which identifies or is reasonably capable
of identifying the entity.
To be able to disclose protected information, a taxation officer must rely on an
exception contained in Division 355 of Schedule 1 to the TAA 1953.
Detailed explanation
Taxation Administration Act 1953
Item 1
This item inserts new table item 8 into the table in subsection 355-65(8) of
Schedule 1 to the TAA 1953, which provides confidentiality exceptions for
miscellaneous matters.
The new table item allows a taxation officer to disclose protected information
to a foreign government agency of a foreign country, or part of a foreign
country, or an entity acting on behalf of such an agency.
A 'taxation officer' is defined in subsection 355-30(2) of Schedule 1 to the TAA
1953 as the Commissioner of Taxation, a Second Commissioner, or an
individual appointed or engaged under the Public Service Act 1999 and
performing duties in the ATO.
The disclosure provisions will enable a taxation officer to disclose to a foreign
government agency of a foreign country, or part of a foreign country,
information relating to a person who has an obligation to repay a student loan
which was issued by, or on behalf of, that agency, or another foreign
government agency of part of, or that, country. The address, contact
information and income of the person with the foreign student loan will be able
to be disclosed.
26
The disclosure provisions will extend to loans made on behalf of a foreign
government agency of a foreign country, or part of a foreign country. This will
ensure that where the loan is made on behalf of an agency, for example, by a
private loan company or a university, a taxation officer will still be permitted to
make the relevant disclosure.
Item 2
This item is an application provision, the effect of which is that the
amendments made by Schedule 4 apply in relation to disclosures made on or
after the later of 1 January 2016 or the day after this Act receives the Royal
Assent, regardless of when the information was originally acquired.
27
Schedule 5 Other amendments
Summary
Schedule 5 includes consequential amendments to the ITAA 1936 and the
ITAA 1997 to ensure that overseas HELP or TSL debt repayments are not
allowable self-education expenses for Australian income tax purposes.
Background
Currently, the ITAA 1936 and the ITAA 1997 do not specify if payments made
in respect of, or in respect of the reduction or discharge of, any liability to
overseas debtors repayment levy under the Student Loans (Overseas
Debtors Repayment Levy) Act 2015 are allowable self-education expenses for
Australian income tax purposes.
Detailed explanation
Income Tax Assessment Act 1936
Item 1
Section 82A of the ITAA 1936 concerns deductions for self-education
expenses and contains a number of defined terms for the purposes of that
section. Item 1 adds a new paragraph (be) to the definition of expenses of
self-education so that the definition will be as follows:
expenses of self-education means expenses necessarily incurred by
the taxpayer for or in connection with a prescribed course of education
but does not include:
(ba) a student contribution amount within the meaning of the Higher
Education Support Act 2003 paid to a higher education provider (within
the meaning of that Act); or
(bb) a payment made in respect of, or in respect of the reduction or
discharge of, any indebtedness to the Commonwealth under Chapter 4
of that Act; or
(bd) a payment made in respect of, or in respect of the reduction or
discharge of, any indebtedness to the Commonwealth under the Trade
Support Loans Act 2014 ; or
(be) a payment made in respect of, or in respect of the reduction or
discharge of, any liability to overseas debtors repayment levy under the
Student Loans (Overseas Debtors Repayment Levy) Act 2015; or
(c) a payment made in respect of, or in respect of the reduction or
discharge of, any indebtedness to the Commonwealth or to a
participating corporation under Chapter 2B of the Social Security Act
1991 or Part 4A of the Student Assistance Act 1973.
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Income Tax Assessment Act 1997
Items 2 and 3
Section 12.5 of the ITAA 1997 contains a table setting out certain rules about
specific types of tax deductions.
Item 2 amends the reference in the table to education expenses to add in
reference to overseas debtors repayment levy - so that it will read as
follows:
education expenses
Higher Education Contribution Scheme, no deduction
unless provided as fringe benefit 26-20
limit on deduction 82A
see also overseas debtors repayment levy
Item 3 inserts the following into the table:
overseas debtors repayment levy
limit on deduction 82A
payment made to reduce a liability to overseas 26-20
debtors repayment levy under the Student Loans
(Overseas Debtors Repayment Levy) Act 2015, no
deduction unless provided as a fringe benefit
Item 4
Division 26 of the ITAA 1997 provides that some amounts are not deductible,
or not deductible in full and subsection 26-20(1) provides that certain
assistance to students matters are not deductible under the Act.
Item 4 amends subsection 26-20(1) to insert the following item to ensure an
overseas repayment is not deductible under the Act:
(ce) a payment made to reduce a liability to overseas debtors
repayment levy under the Student Loans (Overseas Debtors
Repayment Levy) Act 2015; or
29