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Student Assistance (Budget Matters) Amendment Bill 1994



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House: House of Representatives

Portfolio: Schools, Vocational Education and Training

Commencement: Royal Assent

Purpose

The major amendments proposed by this Bill will:

* allow AUSTUDY/ABSTUDY recipients who receive a benefit during 1995, or a later year, to repay the whole or any part of that benefit at any time during the year; and

* make the AUSTUDY/ABSTUDY loan supplement available to students, from 1995, who do not qualify for AUSTUDY/ABSTUDY benefits because of the spouse income test, provided the spouses income is less than the prescribed amount.

Background

The Student Assistance Act 1973 (the Principal Act) provides for the payment of benefits under the AUSTUDY and ABSTUDY schemes, and the provision of loan supplements for tertiary students.

Subject to income and assets test, the AUSTUDY scheme provides living allowances to students undertaking full- time secondary and tertiary education. In 1992- 93, there were 466 676 recipients of AUSTUDY, resulting in an expenditure of $1 438 million. 1 The number of AUSTUDY recipients are estimated to total 414 924 in 1993- 94 and result in expenditure of 1 381 million. 2

The ABSTUDY scheme aims to increase Aboriginal and Torres Strait Islander participation in secondary and tertiary education. It provides income tested living allowances to Aboriginal and Torres Strait Islander students undertaking full- time secondary education, full- time primary education (if aged 14 or older) and part- time allowances to help cover school or course fees, boarding fees, travel costs and other incidentals such as books and stationary. In 1992- 93, there were 42 893 recipients of ABSTUDY benefits, resulting in expenditure of $106.3 million. 3 It is estimated

that ABSTUDY recipients will total 43 750 in 1993- 94 and result in expenditure of $109 million. 4

The loan supplement was introduced on 1 January 1993, and is open to students who qualify for benefits under the AUSTUDY or ABSTUDY schemes, or who would so qualify on a parental income test. Eligible tertiary students can obtain an interest- free loan from a participating financial institution to increase the level of assistance beyond that provided under the AUSTUDY or ABSTUDY schemes. Supplement loans are paid to students in fortnightly instalments.

Loan supplements repaid within the first five years of receipt are discounted by 15% discount. After five years, and if a recipients taxable income reaches average earnings, repayments are made through the Australian Taxation Office.

Students eligible for loan supplements are divided into two categories. Category 1 students are tertiary students who are eligible for an AUSTUDY or ABSTUDY grant. Category 1 students can trade in up to $3 000 of their benefit in return for twice the amount as a loan supplement. Category 2 students are tertiary students who are financially dependent on the parents and meet all the eligibility criteria for AUSTUDY or ABSTUDY grants, other than the parental income test, and whose parents family income is under $50 000. Category 2 students can apply for a loan supplement of up to $2 000.

The value of AUSTUDY/ABSTUDY loan supplements taken out by tertiary students in 1992- 93 totalled $110 million. 5 The estimated value of new loan supplements for 1993- 94 is $206 million. 6 The number of loan supplement recipients totalled 37 333 in 1992- 93 and is estimated to total 64 000 in 1993- 94. 7 Commonwealth expenditure on loan supplements (including interest charges, early buy back amounts and other charges paid to the Commonwealth Bank) totalled $200 000 in 1992- 93 and is estimated to total $14 million in 1993- 94. 8 The average loan supplement taken out by Category 1 students in 1992- 93 was $3 132; this is estimated to increase to $3 694 in 1993- 94. 9 The average loan supplement for Category 2 students in 1992- 93 was $1 784. 10

Main Provisions

Subsection 7(8) of the Principal Act allows recipients of AUSTUDY/ABSTUDY benefits to choose to repay those benefits within a certain period. The primary reason for such a repayment is that the person wants to maximise his or her entitlement to a loan supplement under Part 4A of the Principal Act. Under subsection 7(8) AUSTUDY/ABSTUDY benefits received during the periods from 1 January to 31 May or from 1 July to 30 September must be repaid by the end of the relevant period.

The effect of the amendment proposed to subsection 7(8) will be to limit its operation to the repayment of benefits received before 1995. Proposed subsection 7(9) will allow AUSTUDY/ABSTUDY recipients who receive a benefit during 1995, or a later year, to repay the whole or any part of that benefit at any time during the year.

Section 12C of the Principal Act is the provision which divides students eligible for loan supplements into two categories. As noted above, Category 1 students are tertiary students who are eligible for an AUSTUDY or ABSTUDY grant [12C(1)(b)(i)]. Category 2 students are tertiary students who are financially dependent on the parents and meet all the eligibility criteria for AUSTUDY or ABSTUDY grants, other than the parental income test, and whose parents family income is under $50 000 [12C(1)(b)(ii)].

A new paragraph 12C(1)(b)(iii) will be inserted into the Principal Act to create a third category of students eligible for loan supplements. Under this category, loan supplements will be available to students, from 1995, who do not qualify for AUSTUDY/ABSTUDY benefits because of the spouse income test, provided the spouses income is less than the prescribed amount. The Explanatory Memorandum states that the prescribed amount will be $35 000 in 1995.

Endnotes

1. Department of Employment, Education and Training, Programs 1993- 94, p. 105.

2. Ibid.

3. Ibid.

4. Ibid.

5. Ibid., p. 107.

6. Ibid.

7. Ibid., p. 108.

8. Ibid., p. 108.

9. Department of Employment, Education and Training, Questions On Notice For Senate Estimates Hearings, June 94, p. 79.

10. Ibid.

Ian Ireland (Ph. 06 2772438)

Bills Digest Service 1 August 1994

Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1994.

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Published by the Department of the Parliamentary Library, 1994.