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Monday, 9 November 2015
Page: 8030


Senator BIRMINGHAM (South AustraliaMinister for Education and Training) (19:54): I thank all senators who have contributed to the debate on the Education Legislation Amendment (Overseas Debt Recovery) Bill 2015 and the Student Loans (Overseas Debtors Repayment Levy) Bill 2015. The government is very proud of this reform, because we believe it will build and strengthen the sustainability of our higher education loans program—the HECS scheme, as it was originally established—which underpins the operation of higher education in Australia. It is critical that we ensure the sustainability of these HELP programs, because, by ensuring their sustainability, we then preserve to the maximum extent the capacity of future governments and future taxpayers to continue to support higher education around Australia.

These measures ensure the sustainability of what is a world-class students loans scheme, a scheme that ensures students in Australia have access to higher education, increasingly to vocational education, and support for apprenticeships, all of it in a manner that ensures they need not pay up-front and that they have equitable access, no matter how much they may earn or how much their family may have. It ensures that they have the capacity to attend university, or get a vocational diploma or an advanced diploma, without having the barrier of up-front fees.

These bills are not only about ensuring sustainability of the HELP programs, but are also about fairness. They are about ensuring that no matter who you are once you have finished your university degree, or your other program, or where you go in the world, you face the same repayment terms, to underpin the future sustainability of the system.

Out of this legislation the Australian government is introducing repayment obligations for overseas student loan debtors. The simple message is that if you live overseas at the end of your study you will have the same repayment obligations as people who live in Australia—no more and no less. Repaying your student loan debt, if you are earning above the repayment income threshold, is fair for everyone. It ensures the sustainability of the HELP program, which has played a critical role over the last 25 years in increasing access to higher education.

The success of HELP, and its predecessor HECS, is something of which all sides of politics I believe can rightly be proud. But we need to make sure that the HELP program continues to be the best and fairest student loans scheme in the world, and to ensure that they continue to play a critical role in the decades to come. That is why this government has taken steps to strengthen repayment arrangements by closing a loophole that has in fact existed since HECS began, back in 1989.

Until now, a person's repayment income was based on their taxable income, as defined by the Australian Taxation Office. This meant that a person who was not a resident for tax purposes did not face repayment obligations. As a result, we are losing tens of millions of dollars every year because of student loan debtors who go overseas and from whom we do not collect repayments. It is important to understand that every single year in which a loan is deferred is a cost to the budget bottom line and to every other Australian taxpayer, because student debts are indexed at the CPI rate only, whilst the cost to government of carrying these debts is closer to or at the long-term bond rate. As a result of that, it is a continued increase in cost where debts are continually deferred. Therefore, if a student is overseas for a prolonged period of time at the conclusion of their degree or other course program, the cost to taxpayers of that debt not having been repaid increases over the course of that time.

Professor Bruce Chapman, who is widely recognised as being the architect of HECS, as it was adopted by the Hawke government—and he was there when HECS began—has repeatedly said that this is a problem that we can fix. He has urged the Senate and governments to look at this problem. We have looked at it and we have come up with a solution, and we are proud to be the first Australian government to close this long-standing loophole. This will mean that in future expatriate debtors are treated in the same way as their onshore peers. From the 2016-17 financial year, overseas student loan debtors will be liable to make repayments based on their assessed worldwide income, which includes both Australian repayment income and foreign sourced income.

The government has put forward two bills as part of this package: the Education Legislation Amendment (Overseas Debt Recovery) Bill 2015, to amend the Higher Education Support Act 2003 and the Trade Support Loans Act 2014 to create the arrangements that underpin the operation of overseas debt recovery; and the Student Loans (Overseas Debtors Repayment Levy) Bill 2015, which will strengthen the legislative basis for the overseas debt recovery program and improve the capacity of the Australian Taxation Office to collect these repayments through existing tax administration arrangements.

From 1 January 2016, HELP and trade support loan debtors who move overseas for six months or more will need to notify the Australian Taxation Office that they have left the country. From 1 July 2017, these debtors will be required to contribute towards repaying their loans based on the income they earned in the 2016-17 financial year. Minor amendments to the Higher Education Support Act 2003 to allow the Department of Education and Training to access tax file numbers also form part of the Education Legislation Amendment (Overseas Debt Recovery) Bill 2015. This extends administrative processes that already exist for trade support loans, and as a result the Department of Education and Training and the ATO will be able to more effectively administer the overseas debt recovery program and the HELP programs more broadly.

The bill also includes minor amendments in the Taxation Administration Act 1953 to allow data sharing of protected tax data with overseas jurisdictions to administer student loan debt. This will allow the government to enter into reciprocal arrangements with other countries to support student loan debt recovery. The government is making good progress with New Zealand and the United Kingdom in exploring the use of reciprocal data sharing to support overseas student loan debt recovery. There are also amendments to the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 included in the bill. These amendments will ensure that repayments made by overseas debtors cannot be claimed as a tax deduction as an allowable self-education expense. Repayments made by Australians living overseas should be treated the same as HELP and trade support loan repayments made by those debtors who still live in Australia.

These bills will for the first time require all Australians, whether they live in Australia or abroad, to make repayments on their student debts based on their income. Those overseas debtors who have benefited from the government's generous income-contingent student loans but until now have been able to avoid paying the taxpayer back for the education they have received will no longer be able to do so. Overseas debtors will now be required to make the same repayments that they would have had to make if they were living in Australia based on their income. Australians who have received the benefits of Australia's world-class education system should make repayments when they are living overseas and earning a good income. To do otherwise undermines the sustainability of the HELP programs. To do otherwise ensures that other taxpayers, including those who have not had the benefit of higher education, face increased costs into the future. However, these bills also ensure that Australians who are not earning—those who are volunteering, full-time carers or looking for work overseas—or only earning a modest amount will not be required to make repayments. The legislation ensures that the same equity provisions apply wherever you live in the world. Just as we have an equitable arrangement in providing access to higher education without the application of up-front fees, so too will we universally apply an equitable arrangement that ensures that, no matter where you live, you do not have to repay the debts unless and until you are earning a reasonable income. These bills, in providing that equity and fairness in the treatment of HELP and trade support loan debts, will help improve the sustainability of our world-renowned income-contingent student loans system.

These loans are the envy of the world. They ensure all Australians are able to access the higher education or apprenticeships they need to contribute to our workforce and economy into the future. The changes made by these two bills will not only preserve these loan schemes for students and apprentices but will improve them by making them fairer for all Australians regardless of where they live. Overseas debt recovery is not just fair for individuals; it is also fair for the taxpayer. By recovering debt from HELP and trade support loans debtors living overseas, the government expects to save more than $25 million in the period from 2015-16 to 2018-19 and more than $150 million over the next 10 years in fiscal balance terms. As I said before, and I reiterate, it is important to appreciate that, the longer it take for repayments to be made, the more it is that taxpayers are subsidising that student. The longer it is that a person is overseas under the current arrangements, enjoying the benefit of not making repayments, the longer they are not only not making a tax contribution to Australia but accruing an ongoing benefit in terms of the subsidy associated with the student loan that they have had courtesy of the Australian taxpayer.

I hope that this outline will allay the concerns of some of the senators who spoke on these bills tonight about the growing value of the HELP debt. I am pleased that opposition senators support the bills. It is an important step in levelling the playing field, while at the same time preserving the income-contingent nature of our student loan schemes. I do give, as I have publicly and elsewhere, full credit to the Hawke government for introducing the HELP debt model, originally known as HECS. It is something that we need to preserve and ensure the sustainability of in the future. I thank Senator Carr and those opposite for their cooperation to date on this matter.

I look forward to hearing further comments, if need be, during the debate tonight. I note the amendments proposed by the Australian Greens. Let me say that in relation to the second reading amendment that has been moved by Senator Simms that I think it is unreasonable to expect solely the use of existing mutual taxation agreements by government. To do so would potentially create a circumstance of extreme cost in terms of the recovery mechanisms for the taxpayer relative to the value, compared with the reality that Australians living in Australia are expected to comply with Australian tax law. They are expected to be aware of their obligations in that regard, and it is not at all unreasonable to expect that people with a debt to Australia via a student loan who may happen to be living overseas should equally be expected to comply with any changes in Australian law, just as we expect Australians who are domiciled here to do so.

Ultimately, Australia needs experienced, innovative workers to drive productivity in our rapidly changing global economy. Our higher education and training systems are critical to this and are vital tools to give Australian students the skills they need for success into the future. Our government is committed to supporting higher education, training and research so that we can take advantage of the opportunities new industries present to us and create a more innovative and productive Australia. Student loan schemes support equal access to higher education and training and, in turn, greater workforce engagement. Overseas debt recovery will contribute, as I have said before, to keeping our generous income-contingent student loan schemes fair and sustainable into the long term. In doing so, they will help to underpin the investment in higher education by this government and future governments well into the long term.

I thank senators for the support that has been expressed thus far of this legislation and for their support of ensuring equitable repayment of student loans by all Australians, regardless of where they live, to ensure the sustainability of this loan scheme and, most importantly, the sustainability of future support to our higher education and training systems.

The ACTING DEPUTY PRESIDENT ( Senator Seselja ): The question is that the second reading amendment moved by Senator Simms be agreed to.