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STUDENT AND YOUTH ASSISTANCE AMENDMENT BILL 1998

13260 CAT. NO. 97 2726 4 ISBN 0644 517999

1998


THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA


HOUSE OF REPRESENTATIVES












STUDENT AND YOUTH ASSISTANCE AMENDMENT BILL 1998



EXPLANATORY MEMORANDUM


















(Circulated by authority of the Minister for Schools, Vocational Education and Training, Senator the Hon Chris Ellison)

STUDENT AND YOUTH ASSISTANCE AMENDMENT BILL 1998

OUTLINE

The Student and Youth Assistance Amendment Bill (the Bill) will make a number of amendments to Part 4A of the Student and Youth Assistance Act 1973 which provides for the AUSTUDY/ABSTUDY Financial Supplement (FS). The measures and their related item number(s) in Schedule 1 in the Bill are outlined in the table below:

FINANCIAL IMPACT

The measures in the Bill have no revenue implications.

STUDENT AND YOUTH ASSISTANCE AMENDMENT BILL 1998

NOTES ON CLAUSES

Clause 1 - Short Title

Clause 1 provides for this Act to be cited as the Student and Youth Assistance Amendment Act 1998.

Clause 2 - Commencement

Subclause 2(1) provides that, subject to subclauses (2) and (3), this Act commences on the day it receives the Royal Assent.

Subclause 2(2) provides that if this Act does not receive the Royal Assent on or before 1 July 1998, items 19 and 20 of Schedule 1 are taken to have commenced on 1 July 1998. These items relate to the compulsory repayment of FS debts through the taxation system. Item 19 inserts prescribed amounts for the year of income ending on 30 June 1998 which determine the amount of a person’s accumulated FS debt that must be repaid in respect of that year. The prescribed amounts are lower than the amounts that would currently apply under the Act due to a change in the basis for indexing these amounts to bring the procedure into line with that applying to the repayment of Higher Education Contribution Scheme debts. Item 20 affects the furnishing of income tax returns by persons who have an accumulated FS debt. It omits the requirement to provide details of outstanding FS debts to the Australian Taxation Office.

Subclause 2(3) provides that item 7 relating to the introduction of a “cooling off” period for the FS scheme will commence on 1 January 1999.

Clause 3 - Schedule(s)

Clause 3 provides that the Student and Youth Assistance Act 1973 is amended or repealed as set out in Schedule 1.

SCHEDULE 1

AMENDMENT OF THE STUDENT AND YOUTH ASSISTANCE ACT 1973

Items 1 - 25 of Schedule 1 set out amendments to the Student and Youth Assistance Act 1973 (the Act) relating to the Financial Supplement (FS) scheme under Part 4A.

The FS scheme was introduced by the Student Assistance Amendment Act 1992 and commenced on 1 January 1993. It is an optional loan scheme which gives eligible tertiary students greater flexibility in meeting their financial needs.

To be an eligible student a person must:

• be studying in an AUSTUDY or ABSTUDY approved course; and

• either be eligible to get AUSTUDY or ABSTUDY living allowance or Pensioner Education Supplement, or only unable to get AUSTUDY or ABSTUDY living allowance because of the application of the parental income test and their parental income is below an amount prescribed in the AUSTUDY/ ABSTUDY Supplement Regulations (for 1998 the prescribed amount is $54,949).

An eligible student can trade in $1 of AUSTUDY or ABSTUDY (up to a maximum of $3,500) to get $2 as a FS loan. The loans are funded by the Commonwealth Bank of Australia under an Agreement with the Commonwealth Government and are paid on a fortnightly basis. The interest charges are met by the Commonwealth Government. Outstanding FS loan balances are indexed annually to movements in the Consumer Price Index.

The Secretary to the Department of Employment, Education, Training and Youth Affairs (the Department) gives written notice to an eligible student of the minimum and maximum FS he or she can get. An eligible student who wishes to apply for FS completes the FS application form and takes it, together with their FS notice, to any branch of the Commonwealth Bank of Australia (the participating financial corporation). When the participating financial corporation (the corporation) accepts the student’s application, a binding contract is formed between the student and the corporation. (The contract runs until 31 May in the fifth year after the year in which the FS is paid or until the FS debt is repaid, whichever occurs first.) The corporation then advises the Department that the student has applied for a FS and has been accepted. The Secretary advises the corporation of the fortnightly amount of FS the student is to be paid. The corporation processes the payment which is deposited into the student’s account.

FS loans are repayable from 1 July in the year in which the contract period ends. So, for example, 1993 FS loans will become repayable from 1 July 1998. A person who has a FS debt may make voluntary repayments during the contract period. Any voluntary repayments attract a discount which increases the value of the repayment.

At the end of the contract period, the Commonwealth “buys” the outstanding FS debt from the corporation. The debt is then owed to the Commonwealth and will be recovered by the Australian Taxation Office under arrangements that are similar to the way in which Higher Education Contribution Scheme debts are recovered. That is, no amount is recovered until the person’s taxable income exceeds a minimum prescribed amount. The debt is recovered at the rate of 2%, 3% or 4% of taxable income depending on whether the person’s taxable income exceeds the minimum, intermediate or maximum prescribed amounts respectively.

Item 1 - Subsection 3(1) (definition of student assistance overpayment)

Subsection 3(1) of the Act contains definitions of terms used in the Act. “Student assistance overpayment” is defined, relevantly, as a debt due by a person other than a financial corporation to the Commonwealth under paragraph 12S(2)(d) or 12U(2)(c).

Amendment

Item 1 amends this part of the definition to add references to debts due under paragraphs 12QB(2)(d) and 12QC(2)(d). This is a consequential amendment to take account of new sections 12QB and 12QC (see items 8 and 9).

Item 2 - Subsection 7(8)

Subsection 7(8) of the Act provides that:

• a person who has received an AUSTUDY or ABSTUDY benefit during the periods from 1 January to 31 May or from 1 July to 30 September may, before the end of the period, repay the whole or part of the benefit; and

• if an amount of benefit is so repaid, the amount is taken, for the purposes of the Act, never to have been paid to the person.

This enables students to consider their financial position until 31 May (if they are studying for the full year or the first semester only) or 30 September (if they are studying for the second semester only) before deciding whether to enter into a FS contract without reducing the amount they can obtain.

Subsection 7(8) is not qualified in any way. This could lead to unintended consequences. For example, a person who has fraudulently obtained AUSTUDY or ABSTUDY benefits could rely on subsection 7(8) to avoid being convicted of an offence by repaying the benefits. The intention of subsection 7(8) is that the repayment of benefits is allowed only for the purpose of an eligible student obtaining FS.

Furthermore, subsection 7(8) does not provide for repayment of benefits after the “cut-off” dates where a person has been prevented from repaying the benefits before those dates only because of circumstances beyond the person’s control. It is intended that the Secretary should be able to allow a person to repay benefits after the “cut off” dates but before 31 December of the year in which the person was paid the benefit in certain circumstances.

Amendments

Item 2 repeals subsection 7(8) of the Act and substitutes new subsections 7(8) to 7(14). This item clarifies the purpose of subsection 7(8) and gives effect to the policy outlined above.

New subsection 7(8) provides that a person who has received a benefit during a “benefit period”
may repay the benefit only in accordance with subsection (9), (10) or (11). “Benefit period” is defined in new subsection 7(13) as:

• the part of a year beginning on 1 January and ending on 31 May; or

• the part of a year beginning on 1 July and ending on 30 September.

New subsection 7(9) provides that a person who is not receiving FS may repay benefits received if the person makes the repayment:

• in order to obtain FS; and

• before the end of the benefit period.

New subsection 7(10) provides that a person may repay benefits after the benefit period, but within the relevant calendar year, if the person makes the repayment in order to obtain FS and in the opinion of the Secretary, the person:

• has taken reasonable steps to repay the benefit before the end of the “benefit period” and the person has been prevented from doing so because of circumstances beyond his or her control; and

• repays the benefit as soon as practicable after the benefit period.

An example of when this might apply is the case of an eligible student who leaves home to lodge his or her FS application with the corporation on 4 March 199X. On the way the person is seriously injured and is hospitalised for several months. The person is discharged from hospital on 7 June 199X and lodges the FS application on the following day. The intention is that new subsection 7(10) would apply in this case.

New subsection 7(11) provides that a person who is receiving FS may repay benefits received if the person does so:

• in order to increase the amount of FS the person can get; and

• while the person is an eligible student in respect of the year of part of the year in which the benefit was paid.

New subsection 7(12) provides that, if benefits are repaid by a person in accordance with subsection 7(9), 7(10) or 7(11) the benefit is taken never to have been paid to the person.

New subsection 7(14) provides that nothing in subsection (8) affects the operation of Part 6 which contains the debt recovery provisions relating to student assistance payments.

Item 3 - Subsection 12A(4) (last sentence)

Section 12A of the Act sets out the object and explanation of Part 4A. Subsection 12A(4) refers to the repayment of the FS and provides, in the final sentence, that there is a 15% discount for any repayments made before the end of the contract period. Such payments are called early repayments.

Division 5 of the Act details how FS repayments within the contract period are to be made, how the amount outstanding at any time under the contract is calculated and how the discount for early repayments is calculated and applied.

The formula for calculating the discount for an early repayment is provided in subsection 12ZA(7). The discount calculated using this formula is an amount of money, not a percentage. The reference to a discount of 15% in subsection 12A(4) of the current Act is therefore misleading. Item 3 addresses this problem.

Amendment

Item 3 omits “There is a 15% discount for any repayments before the end of that period.” from subsection 12A(4) and substitutes “There is a discount, worked out under subsection 12ZA(7) or (7A), for repayments made before the end of that period.”. This amendment also takes account of the new subsection 12ZA(7) (see item 17 below).

Item 4 - Subparagraph 12C(1)(b)(i)

Section 12C of the Act describes eligible students for the purposes of Part 4A. Subsection 12C(1) provides that a person is an eligible student in relation to a year or a part of a year if:

• the person is undertaking, or proposes to undertake, at an education institution in that year or that part of that year, a prescribed course of study or instruction; and

• either of the following applies:

− the person qualifies, or apart from this Part would qualify, for a prescribed benefit under the AUSTUDY scheme or ABSTUDY scheme in respect of that year or that part of that year;

− the adjusted parental income in relation to the person in respect of that year or that part of that year is less than such amount as is prescribed by the regulations and, except for the parental income test applicable under the AUSTUDY scheme or ABSTUDY scheme, the person would have qualified for a prescribed benefit under that scheme in respect of that year or that part of that year.

The expression “, or apart from this Part would qualify,” in subparagraph 12C(1)(b)(i) suggests that Part 4A prevents students from qualifying for a benefit under the AUSTUDY scheme or the ABSTUDY scheme. A student is not, however, prevented from qualifying for AUSTUDY or ABSTUDY because of Part 4A therefore the expression is redundant, and is omitted by item 4.

Amendment

Item 4 omits “, or apart from this Part would qualify” from subparagraph 12C(1)(b)(i) to reflect the above policy intention.

Item 5 - Paragraph 12F(1)(a)

Under the FS scheme, an eligible tertiary student can obtain a FS by entering into a contract for that purpose with a financial corporation that participates in the scheme. Section 12C of the Act describes “eligible students” for the purposes of Part 4A.

Paragraph 12F(1)(a) provides that the Secretary must decide whether a person who seeks to obtain a FS is an eligible student in respect of a year or a part of a year. Paragraph 12F(1)(b) provides that the Secretary must give to the student written notice of his or her decision.

In practice, the decision is made, and notice is given to the student, after his or her eligibility to get AUSTUDY or ABSTUDY has been determined, rather than after the student has applied for FS. The student is advised of his or her eligibility for AUSTUDY or ABSTUDY and FS at the same time. The student can then apply to the financial corporation for FS. This practice is in accordance with the procedure described under “Application and Payment” in the Explanatory Memorandum to the Student Assistance Amendment Act 1992 which introduced the FS scheme.

Amendment

Item 5 omits “seeks to obtain financial supplement” from paragraph 12F(1)(a) and substitutes “applies for benefits under the AUSTUDY scheme or the ABSTUDY scheme”. This will require the Secretary to decide whether a person who applies for AUSTUDY or ABSTUDY is eligible for FS, and accords with current practice.

Item 6 - Section 12G

Subsection 12G(1) of the Act provides that a person who receives a notice of FS entitlement under section 12F may apply for the whole or part of the FS that the person is eligible to obtain by lodging the form of application, duly completed, at any office of the corporation. The FS notice under section 12F must state whether the student is an eligible student in respect of a year or a part of a year.

The policy intention is that a student may apply for the FS only while he or she is an eligible student, unless he or she is prevented from doing so by circumstances that are beyond his or her control. At present, the Act does not reflect this policy intention.

Amendments

Item 6 repeals section 12G and substitutes a new section 12G (“When must a person apply for financial supplement?”). Item 6 also inserts new section 12GA (“Students may give notice to participating corporation to increase or decrease financial supplement”) after new section 12G.

New subsection 12G(1) provides that a person who receives a section 12F notice is entitled to apply for the whole or part of the FS he or she is eligible to obtain in respect of the year or part of the year.

New subsection 12G(2) provides the general rule that an eligible student in respect of a year or a part of a year may obtain FS if he or she applies for FS while he or she is an eligible student in respect of that year or that part of that year.

New subsection 12G(3) provides that a person may obtain FS after the person ceases to be an eligible student if he or she applies for FS in the calendar year in respect of which he or she was an eligible student and, in the opinion of the Secretary he or she:

• had taken all reasonable steps to apply for FS while still an eligible student in respect of that
year or that part of that year; and

• had been prevented from doing so only because of circumstances beyond his or her control; and

• has taken steps to apply for FS in respect of that year or that part of that year as soon as practicable after ceasing to be an eligible in respect of that year or that part of that year.

New subsection 12G(4) provides that an application for FS must be made by lodging the form of application, duly completed, together with the section 12F notice at any office of the corporation.

New subsection 12G(5) provides that the Secretary must notify the applicant and the corporation of a decision made under new subsection 12G(3) in respect of the applicant.

New section 12GA provides that a person who applies for an amount of FS may, at any time after applying, by written notice lodged at any office of the corporation, tell the corporation that the person requires:

• a specified lesser amount of FS, not being an amount that is less than the amount already paid to the person; or

• a specified greater amount of FS, not being an amount that is more than the maximum amount the person can get.

New subsection 12GA retains the effect of paragraph 12G(2)(b) which is repealed by this item.

Item 7 - After section 12K

Division 2 of the Act sets out, among other things, how an eligible student can apply for the FS.

Subsection 12G(1) provides that an eligible student may choose to apply for the FS by lodging the form of application for the FS, duly completed, at any office of a participating corporation (i.e. a corporation that has entered into an agreement with the Minister, on behalf of the Commonwealth, for the payment by the corporation of FS).

Subsection 12K(1) provides that the corporation must, as soon as practicable, accept the application by written notice to the student.

Subsection 12K(2) provides that acceptance of the application forms a binding contract between the corporation and the student for the making of a loan by the corporation to the student.

Paragraph 12G(2)(a) provides that at any time after a person applies to the corporation for FS, the person may, if he or she has not received any payments in respect of the application, withdraw the application by written notice to the corporation.

The situation can arise where:

• a student applies for FS in accordance with section 12G; and

• the corporation accepts the application in accordance with section 12K; and

• after acceptance by the corporation, but before the student has received any payments under the contract, the student notifies the corporation by written notice that he or she wishes to withdraw the application in accordance with paragraph 12G(2)(a); and

• after acceptance, but before the Department is advised by the corporation of the student’s notification of withdrawal, the application is processed by the Department and payments in respect of the application commence and the student subsequently receives a FS payment.

In these cases, payments made to the student are taken to be FS payments and students who wish to withdraw an application for FS, and who have complied with the necessary requirements, incur a FS debt because of the time needed by the corporation to process the withdrawal notice and advise the Department.

Item 7 introduces a “cooling off” period to the FS arrangements to address this problem.

Amendments

Item 7 inserts new sections 12KA (“Cooling off period for financial supplement contract”) and 12KB (“Person may waive the right to cancel the contract”) after section 12K.

New subsection 12KA(1) provides that an eligible student under a FS contract has a right to:

• cancel the contract; and

• waive the right to cancel the contract (see comments on section 12KB below).

New subsection 12KA(1) also provides that if a student waives the right to cancel the contract subsections (2) to (6) do not operate in respect of that contract. This ensures that a student who has waived the right to cancel the contract cannot change his or her mind and exercise the right to cancel the contract at a later date within the “cooling off” period.

New subsection 12KA(2) provides that to exercise the right to cancel the contract, a student must give the corporation written notice that the student is withdrawing his or her application for FS. The notice may be lodged at any office of the corporation. (Regulation 4 of the AUSTUDY/ABSTUDY Supplement Regulations provides that “office” in relation to the corporation means a branch office and does not include an agency or administrative office.)

New subsection 12KA(3) provides that the student’s right to cancel the contract is exercisable at any time within the period of 14 days after the day the corporation accepts the student’s FS application. This period of 14 days is the cooling off period.

New subsection 12KA(4) provides that the corporation must not make a payment to the student under the FS contract during the cooling off period.

New subsection 12KA(5) provides that if:

• the corporation makes a payment to the student under the FS contract before the end of the cooling off period; or

• the corporation makes a payment to the student under the FS contract after the end of the cooling off period and the student has exercised the right to cancel the contract within the cooling off period;

the payment is taken not to be FS if an amount equal to the payment is repaid by the student to the corporation within seven days after the day of the payment.

New subsection 12KB(1) provides that an eligible student under a FS contract may waive the right to cancel the contract.

New subsection 12KB(2) provides that to exercise the right of waiver, the student must give written notice to the corporation that he or she is waiving the right to cancel the contract immediately after the corporation has accepted the student’s FS application (within the meaning of subsection 12K(2)).

Item 8 - Section 12P

Section 12P provides an explanation of Division 4 - “Payments under financial supplement contract to stop in certain circumstances”.

Item 9 below describes the consequences relating to cases in which the maximum amount of FS a student is eligible to get is reduced to an amount that is less than the amount the student has already been paid.

Amendment

Item 8 repeals section 12P and substitutes a new section 12P (“Explanation of Division”) to provide the additional requirement that payments of FS are to stop if a person in receipt of the FS is found to be eligible for a reduced amount of FS and has already been paid that amount.

Item 9 - After section 12Q

FS payments to a person stop if the person requests that FS payments are to cease (section 12Q) or where the person:

• ceases to be an eligible student (section 12R);

• fails to notify the Department that he or she ceased to be an eligible student (section 12S);

• is found never to have been an eligible student (section 12T); or

• was never an eligible student but FS was paid because the person provided false or misleading information (section 12U).

These sections also provide consequences that flow from the student ceasing to receive FS or ceasing to be an eligible student.

Students are required by section 48 of the Act to notify the Secretary of changes in their circumstances within seven days of the change happening. In the ordinary run of events, where a student complies with this requirement and remains an eligible student, the FS entitlement is reassessed. If as a result of the reassessment the student’s maximum FS entitlement is reduced, but the reduced amount is more than the amount that has already been paid to the student, payments continue, albeit at a reduced rate.

However, in some cases the timing of this advice, or the impact of it, results in a reassessment that reduces the student’s FS entitlement to an amount that is less than the amount he or she has already been paid. In other cases, a student may fail to notify the Secretary of the change in circumstances within the prescribed period which results in the corporation paying the student a greater amount of FS than he or she is entitled to, or the student may obtain a higher amount of FS than he or she was ever entitled to by providing false or misleading information in his or her AUSTUDY or ABSTUDY application. The Act is amended to provide the consequences that attach to these cases.

Amendments

Item 9 provides the consequences that flow in cases where a student remains eligible for the FS but is entitled to access a reduced maximum amount (see item 1 above which has amended the definition of “student assistance overpayment”).

New sections 12QA (“Payments to eligible students to stop if the maximum amount of financial supplement is reduced to less than the amount already paid”), 12QB (“What happens if financial supplement was paid to eligible student after student failed to notify change of circumstances”) and 12QC (“What happens if financial supplement was paid to eligible student because of the provision of false or misleading information”) are inserted by item 9.

New subsection 12QA(1) provides that, in cases where the amount of FS a student is eligible to get is reduced to an amount that is less than the amount already paid to the student, a notice must be given by the Secretary to the student and the corporation advising of the revised amount of FS the student is eligible to obtain and the amount of FS paid in excess of the revised amount and that the corporation must cease paying FS to the student.

New paragraph 12QA(2)(a) will discharge the corporation from liability to make further payments to the student under the FS contract from the time the subsection 12QA(1) notice is given to the corporation.

The situation could arise where, despite paragraph 12QA(2)(a), the corporation continues to make FS payments to the student because, for example, the timing of the notice discharging the corporation from liability to make further payments overlaps with a FS pay day. In these cases, new paragraph 12QA(2)(b) will provide that payments to the student after four weeks after the subsection 12QA(1) notice is given to the corporation are not FS, are recoverable by the corporation as a debt from the student and are repayable by the student to the corporation. This means that payments made within four weeks after the notice is given to the corporation will be FS.

New subsection 12QA(3) provides that section 12QA has effect subject to section 12ZX (What happens if decision of Secretary is set aside or varied).

New subsection 12QB(1) provides that the Secretary may give written notice to an eligible student who has received a notice under section 12QA and to the corporation of his or her decision that the student failed to notify the Department of a prescribed event under section 48 of the Act within seven days of the event happening.

New subsection 12QB(2) provides for the treatment of the amount of FS paid to a student (to whom subsection 12QB(1) applies) in excess of the reduced maximum amount that the student is eligible to obtain under section 12QA. Paragraph 12QB(2)(a) provides that the corporation’s rights in respect of the amount paid after the period of seven days referred to in subsection (1) and before the end of four weeks after the day that the notice was given to the corporation (this is, the “wrongly paid FS”) are assigned to the Commonwealth on the day that the notice was given to the corporation.

Paragraph 12QB(2)(b) provides that any actual repayments made by the student before the notice was given to the student are applied firstly towards the repayment of the wrongly paid FS and then towards the repayment of the remainder of the FS paid to the student under the contract.

Paragraph 12QB(2)(c) provides for the Commonwealth to pay to the corporation the amount of any wrongly paid FS that has not been repaid.

Paragraphs 12QB(2)(d) provides that the student is liable to pay to the Commonwealth:

• the amount that the Commonwealth is liable to pay to the corporation under paragraph 12QB(2)(c); and

• an amount equal to the amount of the subsidy paid by the Commonwealth to the corporation in lieu of interest on the amount of FS paid to the student in respect of the period beginning at the end of the period of seven days referred to in subsection 12QB(1) and ending at the end of the period of four weeks referred to in paragraph 12QA(2)(b).

New subsection 12QB(3) provides that nothing in section 12QB affects the operation of section 12QA.

The overall effect of section 12QB is that where a student fails to notify a prescribed event as required by section 48 of the Act but nevertheless remains eligible for a reduced amount of FS and that reduced amount is less than the amount already paid to the student by the corporation:

• the corporation is not required to make further FS payments to the student;

• the wrongly paid FS comprises any payments made after the seven day period in which the student must advise of the happening of the prescribed event and before the end of four weeks after the corporation is advised not to make further FS payments to the student;

• the Commonwealth is liable to pay to the corporation the amount of wrongly paid FS that has not been repaid by the student; and

• the student is liable to pay to the Commonwealth the amount that it is liable to pay to the corporation and the interest subsidy amount that the Commonwealth has paid to the corporation on the wrongly paid FS.

New subsection 12QC(1) provides that the Secretary may give written notice to an eligible student
and to the corporation who has received a notice under section 12QA and, in respect of whom, the Commonwealth has been provided with false or misleading information.

New subsection 12QC(2) provides for the treatment of the amount of FS paid to a student to whom subsection 12QC(1) applies in excess of the reduced maximum amount that the student is eligible to obtain under section 12QA. Paragraph 12QC(2)(a) provides that the corporation’s rights in respect of the amount paid during the period beginning at the end of the date on which the student was paid an amount equal to the revised amount and before the end of four weeks after the day that the notice was given to the corporation (this is, the “wrongly paid FS”) are assigned to the Commonwealth on the day that the notice was given to the corporation.

Paragraph 12QC(2)(b) provides that any actual repayments made by the student before the notice was given to the student are applied firstly towards the repayment of the wrongly paid FS and then towards the repayment of the remainder of the FS paid to the student under the contract.

Paragraph 12QC(2)(c) provides for the Commonwealth to pay to the corporation the amount of any wrongly paid FS that has not been repaid.

Paragraphs 12QC(2)(d) provides that the student is liable to pay to the Commonwealth:

• the amount that the Commonwealth is liable to pay to the corporation under paragraph 12QC(2)(c); and

• an amount equal to the amount of the subsidy paid by the Commonwealth to the corporation in lieu of interest on the amount of FS paid to the student in respect of the period beginning at the end of the date on which the student was paid an amount equal to the revised amount referred to in paragraph 12QA(1)(e) and ending at the end of the period of four weeks referred to in paragraph 12QA(2)(b).

The overall effect of section 12QC is that where the Commonwealth has been provided with false or misleading information in respect of a student but the student nevertheless remains eligible for a reduced amount of FS and that reduced amount is less than the amount already paid to the student by the corporation:

• the corporation is not required to make further FS payments to the student;

• the wrongly paid FS comprises any payments made after the day on which the student was paid an amount equal to the revised amount and before the end of four weeks after the corporation is advised not to make further FS payments to the student;

• the Commonwealth is liable to pay to the corporation the amount of wrongly paid FS that has not been repaid by the student; and

• the student is liable to pay to the Commonwealth the amount that it is liable to pay to the corporation and the interest subsidy amount that the Commonwealth has paid to the corporation on the wrongly paid FS.

New subsection 12QC(3) provides that nothing in section 12QC affects the operation of section 12QA.

Item 10 - Subsection 12V(2)

Section 12V of the Act provides that if a student who has a FS contract with the corporation dies during the contract period the Commonwealth will buy back the debt from the corporation.

Paragraph 12V(2)(b) provides that the buy back amount is calculated at the time of the student’s death. This can result in the corporation remaining responsible for any amount paid after the student’s death. As the corporation will not become aware of the student’s death until written notice to that effect is issued in accordance with subsection 12V(1), the corporation should not be responsible for any amount paid to the deceased student before the notice is given. However, any payments made after four weeks after the notice is given are to remain the responsibility of the corporation.

Amendments

Item 10 repeals subsection 12V(2) and substitutes new provisions to give effect to the policy outlined above.

New subsection 12V(2) provides that if notice is given to the corporation under subsection 12V(1) that a student who has a FS contract has died:

• from the time the notice is given, the corporation is discharged from liability to make further payments to the student under the contract;

• the corporation’s rights in respect of the student under the contract are assigned to the Commonwealth at the time the corporation ceased to make payments under the contract or at the end of four weeks after the day the notice of the student’s death was given to the corporation, whichever is the earlier;

• the Commonwealth is liable to pay the corporation in respect of those rights the amount worked out in relation to the contract as at the time when the corporation ceased to make payments under the contract or at the end of four weeks after the time the notice was given, whichever is the earlier; and

• the indebtedness of the student to the Commonwealth under the contact as a result of the assignment is discharged.

New subsection 12V(3) provides that if the corporation does make payments to the student after notice of the student’s death is given to the corporation, any amounts so paid after the end of four weeks after the day notice is given:

• are taken not to be FS payments;

• are repayable by the student’s estate to the corporation; and

• are recoverable by the corporation from the student’s estate.

Item 11 - Subsection 12ZA(1)

Section 12ZA provides the rights of students to make FS repayments during the contract period. Subsection 12ZA(1) provides that, subject to paragraphs 12S(2)(d) and 12U(2)(d), the student is not required to make repayments during the contract period in respect of the amount outstanding under the contract. Paragraphs 12S(2)(d) and 12U(2)(d) impose on students the liability to pay the Commonwealth specified amounts relating to wrongly paid FS.

Item 9 above inserts additional provisions (new sections 12QB and 12QC) relating to wrongly paid FS.

Amendment

Item 11 inserts references to paragraphs 12QB(2)(d) and 12QC(2)(d) into subsection 12ZA(1) as a consequence of the additions of new sections 12QB and 12QC.

Item 12 - Subsection 12ZA(5)

Subsection 12ZA(5) provides that if a student purports to make a FS repayment under subsection 1ZA(3) that exceeds the amount that, having regard to the discount to which the student would be entitled under subsection 12ZA(7), would be needed to be paid in order to pay in full the amount outstanding under the contract, the excess is taken not to be a repayment of FS and is to be repaid by the corporation to the student.

Amendment

Item 12 makes a consequential amendment to subsection 12ZA(5) and inserts a reference to subsection 12ZA(7A) into subsection 12ZA(5). New subsection 12ZA(7A) is inserted by item 17.

Items 13 and 14 - Subsection 12ZA(6)

Subsection 12ZA(6) provides what is to happen if a student makes a repayment under subsection 12ZA(3) except:

• to the extent (if any) to which that repayment is taken to have been made in or towards the repayment of any wrongly paid FS referred to in subsection 12S(2); or

• in respect of a repayment made after the giving of a notice under section 12U.

Item 9 above inserts additional provisions (new sections 12QB and 12QC) relating to wrongly paid FS.

Amendments

Item 13 makes a consequential amendment to subsection 12ZA(6) and inserts reference to subsections 12QB(2) and 12QC(2) into paragraph 12ZA(6)(a).

Item 14 makes a consequential amendment to subsection 12ZA(6) and inserts reference to sections 12QB and 12QC into paragraph 12ZA(6)(b).

Items 15 and 16 - Subsection 12ZA(7)

Subsection 12ZA(7) provides for the calculation of the discount in relation to a FS repayment during the contract period.

Amendments

Item 15 omits “The” from subsection 12ZA(7) and substitutes “If the student makes a repayment in respect of the amount outstanding under the contract that is less than the amount outstanding under the contract, the”. This will distinguish the situation dealt with by subsection 12ZA(7) from the situation to be dealt with by new subsection 12ZA(7A). New subsection 12ZA(7A) is inserted by item 17.

Item 16 omits “(the discount)” from subsection 12ZA(7). This is a consequential amendment to take account of new subsection 12ZA(7A).

Item 17 - After subsection 12ZA(7)

Section 12A of the Act contains the object and explanation of Part 4A. Subsection 12A(4) provides that the student is entitled to make early FS repayments during the contract period (i.e. the period starting when the FS contract is formed and ending on 31 May in the fifth year after the year to which the contract relates) and there is a 15% discount for any such repayments.

Section 12ZA deals with repayments during the contract period. Subsection 12ZA(5) provides that where a student intends to repay his or her FS debt in full and the repayment is greater than the amount outstanding when the discount is taken into account, the corporation is required to pay any excess to the student.

Subsection 12ZA(7) provides that the discount in respect of the amount outstanding under the contract is calculated using the following formula:

{the amount repaid x 100/85} - the amount repaid.

Applying the subsection 12ZA(7) formula results in a discount of 17.6% on the amount repaid (which is defined in subsection 12ZA(6) as the amount of the repayment). Therefore, a person who makes a single payment to repay his or her FS debt in full would receive a discount of 17.6%. However, if the person fully repays their FS debt by making a number of repayments, the total discount will approximate, but not equal, 15%. This is illustrated by the examples below which assume that person A and person B both have a non-indexed FS debt of $4,000.

A. Repayment of debt by instalments (Every three months person A repays an amount of $1,000. The final payment is the residual amount).

The excess amount ($83) would be refunded to the student by the corporation. Person A would therefore repay a net amount of $3,389 (i.e. the total repayments ($3,472) less the excess amount refunded by the corporation ($83)).

B. Lump sum repayment of FS debt

The excess amount ($706) would be refunded to the student by the corporation. Person B would therefore repay a net amount of $3,294 (i.e. the amount of the repayment ($4,000) less the excess amount refunded by the corporation ($706))

In neither case is the total discount (which in both of the examples above should be $600) equal to 15%. This is because there is no formula to calculate a 15% discount where a person wishes to make a single lump sum payment to repay his or her FS debt in full.

The policy intention is that if a person repays his or her FS debt in full during the contract period, he or she is entitled to a 15% discount, irrespective of whether the debt is repaid as a single lump sum payment or a number of partial repayments.

Amendments

Item 17 inserts new subsection 12ZA(7A) to provide that a student who makes a repayment that equals the amount outstanding under the contract is entitled to a discount worked out using the formula:

{Amount repaid x 115/100} - Amount repaid.

If this formula is applied to the examples above (see figures in brackets), the discount on the final repayment for person A would be $71. The total amount repaid by person A would be $3,401 i.e. the total repayments ($3,472) less the excess amount refunded by the corporation ($71). (The reason this is not $3,400 is due to rounding of the discount amounts in accordance with subsection 12ZA(8).) Person B would receive a discount of $600 and repay a net amount of $3,400.

Item 18 - Subsection 12ZA(8)

Subsection 12ZA(8) provides for the discount worked out under subsection (7) to be rounded to the nearest dollar (rounding 50 cents upwards).

Item 17 above inserts new subsection 12ZA(7A) to provide a formula to calculate the discount where a student repays an amount that equals the amount of FS outstanding under the contract.

Amendment

Item 18 omits “subsection (7)” from section 12ZA(8) and inserts “subsections (7) and (7A)” to
provide for the rounding of the amount worked out under new subsection 12ZA(7A). This is a consequential amendment to take account of new subsection 12ZA(7A) inserted by item 17.

Item 19 - Subsection 12K(4)

Division 6 of the Act provides for the recovery through the taxation system of a student’s outstanding FS debt after the end of the contract period. The FS repayment arrangements will take effect from 1 July 1998 when outstanding 1993 FS debts become repayable.

Section 12ZK(1) provides that if a person has an accumulated FS debt at the 1 June preceding the time when the person is assessed for income tax in respect of that year of income and his or her taxable income for that year exceeds the minimum prescribed amount, the person is liable to pay to the Commonwealth an amount equal to 2%, 3% or 4% of their taxable income, depending on whether his or her taxable income exceeds the minimum, intermediate or maximum prescribed amount respectively.

Subsection 12ZK(4) prescribes that the minimum, intermediate, and maximum prescribed amounts are the amounts applicable to the repayment of Higher Education Contribution Scheme (HECS) debts for the year of income ending on 30 June 1993 under subsection 68(4) of the Higher Education Funding Act 1988 (the HEF Act). Subsection 12ZK(4) also provides for these amounts to be varied in relation to a later year of income in accordance with the indexation procedure based on the Consumer Price Index set out in subsection 68(5) of the HEF Act.

Section 68 of the HEF Act was repealed by section 16 of the Higher Education Funding Legislation Amendment Act 1993 (the Repealing Act) which commenced on 1 January 1994. Legal advice states that despite the repeal of section 68 of the HEF Act, the indexation procedure referred to in subsection 12ZK(4) of the Act is still operative, however, this is not apparent on the face of the statute and is inconsistent with the policy intention of aligning the indexation procedure for HECS and FS.

Section 106Q of the Repealing Act changed the prescribed amounts for the repayment of HECS debts and made provision for the new amounts to be indexed annually based on movements in Average Weekly Earnings (AWE) instead of the Consumer Price Index.

The Student Assistance Amendment Bill 1994 (the Amendment Bill), which was introduced into the Parliament in the 1994 Autumn sittings attempted to remove the “inconsistency” between HECS and FS described above. It included provisions to maintain the parity between the HECS and FS prescribed amounts and align the procedure for indexing the FS prescribed amounts with that applying to the HECS prescribed amounts. The Amendment Bill was passed by the House of Representatives but did not proceed through the Senate and subsequently lapsed.

Item 19 of this Bill corrects this “inconsistency” of treatment between HECS and FS.

Amendments

Item 19 repeals subsection 12ZK(4) and substitutes new provisions that do not refer to the HEF Act.

New subsection 12ZK(4) provides that the minimum, intermediate and maximum prescribed amounts for the year of income ending on 30 June 1998 are $29,307, $33,305 and $46,629 respectively. These amounts have been calculated by adjusting the amounts that were included in the Amendment Bill for movements in AWE in the relevant period and are lower than the amounts that would apply using the existing CPI based indexation procedure. Subsection 12ZK(4) also provides formulae for calculating the prescribed amounts for subsequent years.

“AWE” is defined by new subsection 12ZK(4) as the average weekly earnings for all employees for the reference period in the December quarter immediately before that year of income and the average weekly earnings for the reference period in each of the four quarters immediately before that December quarter, as published by the Australian Statistician.

New subsection 12ZK(5) provides that the reference period in a particular quarter in a year is the pay period ending on or before the third Friday of the middle month of that quarter.

New subsection 12ZK(6) requires the Minister to publish in the Gazette before the start of the year of income ending on 30 June 1999 and before the start of each following year of income, the prescribed amounts in respect of that year of income.

Item 20 - Section 12ZL

Section 12ZL requires a person to include in his or her tax return for the year of income ending on 30 June 1998 and for later years, the amount of any accumulated FS debt as at 1 June in the year immediately before lodging the return and the amount of any voluntary payments in discharge of that debt since that date.

This provision is not necessary for the collection of FS debts through the taxation system. The Higher Education Funding Act 1988 was amended in 1996 to remove a similar provision relating to the recovery of Higher Education Contribution Scheme debts.

Amendment

Item 20 repeals section 12ZL.

Items 21 and 22 - Subsection 12ZW(5)

Section 12ZW provides for the application of the Bankruptcy Act 1966 to FS debts. Paragraph 12ZW(5)(b) provides that a reference in section 12ZW to a debt arising under or out of the FS contract includes a reference to an amount that the student is liable to pay under paragraph 12S(2)(d) or 12U(2)(c) which relate to FS that a student should not have received. Paragraph 12ZW(5)(d) provides that a reference in section 12ZW to a debt arising under or out of the contract does not include a reference to a debt constituted by an obligation to repay an amount that, because of subparagraph 12Q(2)(b)(i), 12R(2)(b)(i) or 12T(2)(b)(i), is not a payment of FS.

Item 9 above inserts new provisions (sections 12QB and 12QC) to deal with what happens to wrongly paid FS where FS payments to students are to stop because students have already been paid their maximum entitlement.

Amendments

Item 21 inserts “paragraph 12QB(2)(d) and 12QC(2)(d)” into paragraph 12ZW(5)(b) to provide similar treatment of the amounts of FS that should not have been paid by virtue of the inserted paragraphs. A reference in section 12ZW to a debt under or out of the contract would include an amount under paragraphs 12QB(2)(d) and 12QC(2)(d). This is a consequential amendment to reflect new sections 12QB and 12QC.

Item 22 inserts “subparagraph 12QA(2)(b)(i)” into paragraph 12ZW(5)(d) to provide similar treatment of amounts that are not taken to be FS by virtue of the inserted subparagraph. A reference in section 12ZW to a debt under or out of the contract would not include an amount under subparagraph 12QA(2)(B)(i). ). This is a consequential amendment to reflect new section 12QA.

Item 23 - Paragraph 55A(1A)(b)

Paragraph 55A(1A)(b) provides, relevantly, that the Consolidated Revenue is appropriated to make payments to a participating corporation under paragraph 12S(2)(c) or 12U(2)(b). These paragraphs provide that the Commonwealth is liable to pay the corporation amounts equal to amounts of FS that should not have been paid to students in particular circumstances.

Item 9 above provides that the Commonwealth is to pay the corporation amounts equal to amounts of wrongly paid FS (paragraphs 12QB(2)(c) and 12QC(2)(c)).

Amendment

Item 23 inserts reference to paragraphs 12QB(2)(c) and 12QC(2)(c) into paragraph 55A(1A)(b) to provide that the Consolidated Revenue is appropriated so that the Commonwealth may satisfy its liability under the inserted paragraphs. This is a consequential amendment to take account of new sections 12QB and 12QC.

Item 24 - Paragraph 305(5)(b)

Paragraph 305(5)(b) provides that, for the purposes of internal reviews of student assistance decisions, an “adverse decision” in relation to the FS means a decision under section 12R or 12T to stop payment of FS.

Item 9 above inserts section 12QA to provide that payments are to stop in certain circumstances.

Amendment

Item 24 inserts reference to section 12QA into paragraph 305(5)(b) to provide that a decision under that section to stop payments of FS is an “adverse decision”. This is a consequential amendment to take account of new section 12QA.

Item 25 - Paragraph 314(6)(b)

Paragraph 314(6)(b) provides that, for the purposes of reviews of student assistance decisions by the Social Security Appeals Tribunal, an “adverse decision” in relation to the FS means a decision under section 12R or 12T to stop payment of FS.

Item 9 above inserts section 12QA to provide that payments are to stop in certain circumstances.

Amendment

Item 25 inserts reference to section 12QA into paragraph 314(6)(b) to provide that a decision under that section to stop payments of FS is an “adverse decision”. This is a consequential amendment to take account of new section 12QA.

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