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Education Legislation Amendment (Overseas Debt Recovery) Bill 2015

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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.

 

 

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.



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.



 

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). 

 

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.

 

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.



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.

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

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.

 

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

·          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.

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:

 

·          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).

 

 

 

 

 

 

 

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 .



 

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.

 

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.

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 a pplicable percentage of repayment income as the percentage amount of the person’s repayment income applicable under the table in section 154-20 of HESA.

 

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.

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:

 

·          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 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 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.

 



 

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.

 

 

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.

 



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 disclose protected taxpayer information only in certain circumstances.

The law does allow for a taxation officer to disclose address, contact or income information to a foreign government agency (of, or a part of, a foreign country), or an entity acting on behalf of such an agency, so that the foreign government agency can contact a person with a student loan that was issued by, or on behalf of that, or another, foreign government agency (of part of, or that, foreign country).

The disclosure must be for the purposes of contacting the person, and potentially recovering outstanding student loan amounts.

A taxation officer may disclose protected taxpayer information only in certain circumstances.

The law does not allow for a taxation officer to disclose address, contact or income information to a foreign government agency (of, or a part of, a foreign country), or an entity acting on behalf of such an agency, so that the foreign government agency can contact a person with a student loan that was issued by, or on behalf, of that, or another, foreign government agency (of part of, or that, foreign country), for the purposes of contacting the person, and potentially recovering outstanding student loan amounts.  

 

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.

 

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.



 

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 .

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