Commonwealth of Australia Explanatory Memoranda

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FAMILY AND COMMUNITY SERVICES (CLOSURE OF STUDENT FINANCIAL SUPPLEMENT SCHEME) BILL 2003

2002 - 2003





THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

FAMILY AND COMMUNITY SERVICES (CLOSURE OF STUDENT FINANCIAL SUPPLEMENT SCHEME) BILL 2003




EXPLANATORY MEMORANDUM














(Circulated by authority of the Minister for Children and Youth Affairs,
The Hon Larry Anthony, MP)

FAMILY AND COMMUNITY SERVICES (CLOSURE OF STUDENT FINANCIAL SUPPLEMENT SCHEME) BILL 2003

OUTLINE AND FINANCIAL IMPACT STATEMENT

The Student Financial Supplement Scheme (the Scheme) was introduced in 1993 in a climate of high youth unemployment, high interest rates and when few commercial loan packages were available to students. The Scheme is not delivering good outcomes for students or Australian taxpayers. This Bill provides that no new loans, Category 1 or Category 2, will be issued from 1 January 2004.

The Scheme provides a voluntary loan whereby eligible Category 1 tertiary students trade-in $1 of their income support for $2 of loan (up to a maximum of $7000). Category 2 students are those dependent young people not receiving youth allowance as a result of the Parental Income or Family Actual Means Test and whose family income is below a prescribed threshold (less than $64 500 for 2003). Category 2 students are able to apply for a loan of up to $2000. For those Category 1 students taking a loan the income support traded in becomes part of the loan, all of which is repayable. The closure of the Scheme is in response to increasing levels of bad and doubtful debt and reduced take-up of loans. The Australian Government Actuary has estimated that more than 50 per cent of total loans may never be repaid.

Since the introduction of youth allowance in 1998 the take-up of the Scheme has declined by one third. Youth allowance provides flexible benefits such as the $500 advance, higher income free area, student income bank and access to rent assistance.

The Government has decided to close the Scheme to new loans from 1 January 2004.

The SFSS provisions have been retained in the Social Security Act to provide existing and previous loan customers, officers managing the Scheme and review bodies, with immediate access to the relevant legislative provisions. The repayment provisions of the Scheme will continue to apply.

The legislation affected is the Social Security Act 1991.

Date of effect: Royal Assent

Financial Impact:

FAMILY AND COMMUNITY SERVICES (CLOSURE OF STUDENT FINANCIAL SUPPLEMENT SCHEME) BILL 2003

Clause 1 sets out how the Act is to be cited, that is, the Family and Community Services (Closure of the Student Financial Supplement Scheme) Act 2003.

Clause 2 provides that the Act commences on Royal Assent.

Clause 3 provides that each Act that is specified in a Schedule to this Act is amended or repealed as set out in that Schedule.

For ease of description, the following abbreviations are used throughout this explanatory memorandum:

“Social Security Act” means the Social Security Act 1991.
“Scheme” means the Student Financial Supplement Scheme.

Schedule 1 – Amendment of the Social Security Act 1991

Summary of proposed changes

Schedule 1 closes off the Scheme to tertiary students.

Explanation of changes

Item 1 inserts a note after the definition of ‘prescribed educational scheme’ in subsection 5(1) of the Social Security Act alerting the reader that the Scheme is closed to applications from 1 January 2004.

Item 2 of Schedule 1 inserts new Part 2B.1A into the Social Security Act, the object of which is to close the Scheme to applications from 1 January 2004 (new section 1061ZWA refers). New section 1061ZWB provides that people are no longer eligible to obtain financial supplement for an eligibility period beginning on or after 1 January 2004.

Chapter 2B, which sets out the Scheme, will remain in the Social Security Act to ensure that existing Scheme customers, officers managing the Scheme and review bodies, will have easy access to the relevant legislative provisions while there are still customers to whom the provisions apply.

Item 3 inserts new section 1061ZZAC into the Social Security Act. This amendment relieves the Secretary from the statutory obligation of having to make a decision about whether or not a person is eligible to obtain financial supplement after 1 January 2004.

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