House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Education, the Honourable Dan Tehan MP)

Schedule 2 - HELP debt arrangements for very remote HELP debtors

Summary

The amendments to HESA in Schedule 2 to the Bill will commence on 1 January 2020, immediately after the commencement of Schedule 3 to the Student Loan Sustainability Act.

Schedule 2 to the Bill puts in place measures that are intended to assist teachers working in very remote locations in Australia ( very remote HELP debtors ) reduce the HELP loans that they incurred in acquiring their recognised initial teaching qualifications, and to pay off those loans faster.

The measures consist of the following:

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reduced indexation of the HELP debts of very remote HELP debtors while they teach in very remote locations in Australia; and

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remitting the whole of a very remote HELP debtor's outstanding HELP debt associated with their initial teacher education course, after they have undertaken an equivalent of 4 years' full-time work in very remote locations in Australia.

These measures give effect to the announcement by the Prime Minister on 14 February 2019 that teachers will be able to have their HELP debt remitted for their recognised initial teacher education course after they have been employed for four years as a teacher in a school in very remote location of Australia, and have indexation waived on their outstanding HELP debt while they are teaching at that school. A school is defined in Schedule 2 to the Bill to be an early childhood education and care service providing a preschool education program, a preschool, or a school providing primary or secondary education. Accordingly, these measures will assist teachers employed in very remote primary and secondary schools, as well as teachers employed in a very remote early childhood education settings.

Reduced indexation for very remote HELP debtors

A person's accumulated HELP debt represents the amount of the debt that a person has incurred to the Commonwealth at a particular point in time, based on the amount of assistance the person has been loaned under Chapter 3 of HESA and their repayments of those loans under Chapter 4 of HESA. Division 140 of HESA sets out how a person's accumulated HELP debt is worked out.

One element of a person's accumulated HELP debt is their former accumulated HELP debt , which is worked out under Subdivision 140-B of HESA. Every financial year, on 1 June, a person's former accumulated HELP debt is indexed by multiplying it by the indexation factor for that financial year. The indexation factor is worked out in accordance with the formula set out in section 140-10 (as the indexation is by reference to changes in the Consumer Price Index over four quarters, this is usually known as "CPI indexation").

Schedule 2 to the Bill will make amendments to Subdivision 140-B of HESA to change the way in which the indexation factor for a very remote HELP debtor is worked out, such that it is lower than the indexation factor applied to other persons' former accumulated HELP debts. A very remote HELP debtor's indexation factor for 1 June in a financial year will be reduced proportionately in line with the number of days in the previous calendar year that the very remote HELP debtor spent teaching in a very remote location. A teacher who worked the entire previous calendar year in a very remote location will end up with an indexation factor of 1 - meaning that, in substance, their former accumulated HELP debt will not be indexed at all that financial year. Further examples are set out below under item 7.

Debt reduction for very remote HELP debtors

Schedule 2 to the Bill will also make amendments to Subdivision 140-C of HESA to change the way in which a very remote HELP debtor's accumulated HELP debt is worked out. Once a teacher has worked in very remote locations in Australia for a certain period of time (currently, the equivalent of four years' full-time work), they will be able to apply to the Secretary for remission of their outstanding HELP debt incurred in studying for their recognised initial teacher education course. If they meet the requisite criteria, an amount equal to the HELP debts they have incurred for the units forming part of their initial teacher education course, or the amount of their outstanding HELP debt at the time they started teaching in a very remote location (whichever is lower), will be taken off their accumulated HELP debt.

Detailed explanation

Part 1 - Amendments

Higher Education Support Act 2003

Item 1 - At the end of section 128-25

Section 128-25 of HESA is inserted by the Student Loan Sustainability Act, and provides that the Secretary must re-credit a person's HELP balance by an amount equal to the amount that a person pays off their HELP debt under Chapter 4 in a financial year.

Item 1 will amend section 128-25 to include a new subsection (3), the effect of which will be that the Secretary must re-credit a very remote HELP debtor's HELP balance by the amount by which their accumulated HELP debt is reduced under new section 142-15.

Item 2 - Section 129-1 (after paragraph beginning "Under Part 4-2")

Section 129-1 of HESA sets out a summary of the operation of Chapter 4 of HESA. Item 2 will amend that summary to include text briefly explaining the operation of the new measures.

Item 3 - After section 134-1

Item 3 will insert a new section 134-5 into HESA that explains that matters relating to very remote HELP debtors may also be dealt with under the Very Remote HELP Debtor Guidelines. The Minister will make these Guidelines under section 238-10 of HESA, as amended by this Bill (see item 13).

The Very Remote HELP Debtor Guidelines will provide support to the operation of the very remote HELP debtors indexation and debt remittal measures, including by setting out:

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circumstances in which a person is taken, or is not taken, to work as a teacher on a day (s 142-1(3)(a));

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circumstances in which a person is taken, or is not taken, carry out work as a teacher at a school located in an very remote location (s 142-1(3)(b));

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circumstances in which a person is taken, or is not taken, to be a very remote HELP debtor for a period (s 142-1(3)(c));

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courses that are, or are not, courses of study in education (s 142-5(2)).

The Very Remote HELP Debtor Guidelines will also be able to set out criteria for being a very remote HELP debtor, and factors that the Secretary may have regard to in assessing whether a person is a very remote HELP debtor.

Item 4 - After paragraph 140-1(3)(c)

Section 140-1 is an outline of Division 140, which provides for how a person's accumulated HELP debt is worked out. Item 4 will amend subsection 140-1(3) to add a new paragraph (d), explaining that a person's accumulated HELP debt is reduced under the new section 142-15.

Items 5, 6, 7 and 8 - Reduced indexation for very remote HELP debtors

Section 140-10 of HESA sets out the method for determining the indexation factor for a person's former accumulated HELP debt. Items 6 and 7 will amend section 140-10 to provide for the method for working out the indexation factor of a very remote HELP debtor.

Item 6 amends subsection 140-10(1) so that a person who the Secretary has determined is a very remote HELP debtor for a financial year (under new subsection 142-10 - see item 11) has their indexation factor for that year worked out in accordance with subsection (1A) rather than the method statement in subsection (1).

Item 7 inserts a new subsection (1A) into section 140-10, which contains the formula for working out a very remote HELP debtor's indexation factor for a financial year. The effect of the formula is that a very remote HELP debtor's indexation factor is reduced in proportion to the number of days in the preceding calendar year that the Secretary has determined under section 142-10.

The following sets out some examples of how the indexation factor of a teacher working in schools in very remote locations will be worked out under the formula in subsection (1A).

Example 1

The indexation factor for the financial year 2019-20 worked out using the method statement in subsection 140-10(1) is 1.028. A teacher is placed in a very remote school for the whole 2019 school year. However, because of the operation of subitem 15(2) of Schedule 2 to the Bill, the first date on which a person can be a very remote HELP debtor for the indexation reduction provisions is 14 February 2019. Accordingly, under section 142-10, the Secretary determines that the teacher was a very remote HELP debtor for 321 days in 2019 (being the number of days in 2019 from 14 February to 31 December inclusive).

Putting these numbers into the formula in subsection 140-10(1A), the teacher's indexation factor for the financial year 2019-20 is:

or (rounded to three decimal places) 1.003.

Example 2

The indexation factor for the financial year 2020-21 worked out using the method statement in subsection 140-10(1) is 1.025. A teacher is placed in a very remote school for the last six months of the 2020 school year. Accordingly, under section 142-10, the Secretary determines that the teacher was a very remote HELP debtor for 184 days in 2020 (being the number of days in 2020 from 1 July to 31 December inclusive).

Putting these numbers into the formula in subsection 140-10(1A), the teacher's indexation factor for the financial year 2020-21 is:

or (rounded to three decimal places) 1.012.

Example 3

The indexation factor for the financial year 2020-21 worked out using the method statement in subsection 140-10(1) is 1.025. A teacher works as a replacement teacher in very remote schools intermittently during the 2020 school year, working in total some 12 weeks in very remote schools during the year. Under section 142-10, the Secretary determines that the teacher was a very remote HELP debtor for 84 days in 2020 (12 weeks x 7 days per week).

Putting these numbers into the formula in subsection 140-10(1A), the teacher's indexation factor for the financial year 2020-21 is:

or (rounded to three decimal places) 1.019.

Items 5 and 8 make minor amendments to paragraph 140-5(1)(b) and section 140-20 as a consequence of the amendments made by items 6 and 7.

Items 9 and 10 - Reduced accumulated HELP debt for very remote HELP debtors

Item 9 will replace the formula in subsection 140-25(1) of HESA that sets out how a person's accumulated HELP debt for a financial year is worked out. In substance, the new formula includes a new reduction in a person's accumulated HELP debt, being the very remote HELP debtor reduction.

Item 10 will insert a definition of very remote HELP debtor reduction in subsection 140-25(1) for the purposes of the new formula. A person's very remote HELP debtor reduction for a financial year is the amount by which the person's accumulated HELP debt is reduced as a result of a determination under new section 142-15 that is made on or after 1 June in the preceding financial year and before 1 June in that financial year.

Item 11 - New Division 142-Special measures for very remote HELP debtors

Item 11 will insert a new Division 142 in HESA. The new Division will enable the Secretary to determine that a person is a very remote HELP debtor:

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for a financial year, for the purposes of reducing the person's indexation factor for that year; and

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in relation to a course of study, for the purposes of reducing the person's accumulated HELP debt.

Section 142-1 - Meaning of very remote HELP debtor

New section 142-1 sets out the meaning of very remote HELP debtor. A person can be a very remote HELP debtor on a day if:

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the person carries out work as a teacher on that day at a school located in an area classified as very remote Australia under the ABS Remoteness Structure (see item 14); and

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the person has completed a course of study in education (see s 142-5); and

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the person incurred a HECS-HELP debt or a FEE-HELP debt in relation to that course of study.

Subsection 142-1(2) defines a school as:

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an early childhood education and care service that includes a preschool education program;

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a preschool;

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a school providing primary or secondary education.

Therefore, the measures extend to teachers teaching in early childhood education settings, as well as teachers teaching in primary and secondary schools.

Under subsection (3), the Very Remote HELP Debtor Guidelines will be able to set out when a person is taken to have carried out work on a day, when a person is taken to have carried out work at a particular location, and when a person is taken to have been a very remote HELP debtor for a period. The intention of this provision is to enable flexibility in administration of the measures, in particular:

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by enabling a person to be treated as carrying out work on a day that they were not in fact carrying out work, for example, on a weekend, or during a period of leave;

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by enabling a person to be treated as carrying out work in a very remote location when in fact they were not physically present in that location; and

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by enabling a person to be treated as a very remote HELP debtor for a period when they only undertook work in a very remote location for a proportion of that period.

Thus, for example, the Guidelines can provide that a teacher is treated as working every day in a year that they are placed in a very remote school, notwithstanding that they will not be normally working weekends or while they are on leave, and notwithstanding that for some periods in the year they may not be physically located in a very remote location (such as while they are on leave, or undertaking professional development somewhere else).

Similarly, for the purposes of working out for how long a teacher has been working in a very remote location in order to qualify for debt reduction under section 142-15, the Guidelines can provide that a part-time teacher is treated as working in a very remote location for a period that is proportionate to their part-time work hours - so, for example, if full-time work hours for a teacher is 40 hours per week, a teacher who works 25 hours per week in a very remote location for year can be treated as having worked in a very remote location for 25/40 (0.625) of a year.

Section 142-5 - Meaning of course of study in education

New section 142-5 will define the courses that a very remote HELP debtor must have completed for the purposes of the very remote HELP debtor indexation reduction and debt reduction measures.

A course of study in education is a course of study that meets the minimum academic qualification requirements for registration as a teacher by a State or Territory teacher registration authority. This will generally include:

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undergraduate initial teacher education courses, such as a Bachelor of Education; and

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undergraduate Bachelor degrees accompanied by postgraduate initial teacher education courses, such as a Graduate Diploma of Education.

However, State and Territory teacher registration requirements do vary slightly and do provide authorities some flexibility in accepting qualifications, and so there is a need to provide flexibility in defining the courses of study in education that enable a person to qualify for the very remote HELP debt measures. Accordingly, the Very Remote HELP Debtor Guidelines will be able, if necessary, to further refine which courses are or are not courses of study in education for those purposes.

Section 142-10 - Reducing indexation of accumulated HELP debts

New section 142-10 will enable the Secretary to determine that the indexation of a person's accumulated HELP debt for a financial year is to be reduced. In order to do so:

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the person must have an accumulated HELP debt on 1 June in that financial year;

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the Secretary must be satisfied that the person was a very remote HELP debtor for at least one day during the calendar year ending on 31 December in the financial year ( applicable calendar year ); and

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the Secretary must be satisfied that the person has met any other requirements specified in the Very Remote HELP Debtor Guidelines.

Under subsection (4), a person may apply to the Secretary for a reduction of the indexation of their accumulated HELP debt for a financial year. The application must be in writing, in the form approved by the Secretary and accompanied by the information required by the Secretary, include the person's tax file number, and otherwise meet any requirements specified in the Very Remote HELP Debtor Guidelines. Information required by the Secretary may include evidence of a person's employment in a very remote location, including a contract or engagement letter with their employer.

The application needs to include the person's tax file number, as that information is essential for the administration of the debt reduction measure. Under Chapter 4 of HESA, administration of HELP debts is a matter for the Commissioner of Taxation (i.e. the ATO). Once the Secretary has determined that a person's HELP debt indexation is to be reduced for a financial year, the Secretary will need to provide the person's tax file number along with their other details to the ATO in order for the ATO to do the calculation of the person's indexation factor under the new subsection 140-10(1A) (see item 7) and apply that indexation to the person's former accumulated HELP debt for that year.

Under subsection (3), once the Secretary has received a person's application, the Secretary must determine whether to reduce the person's HELP debt indexation for a financial year within 28 days. As per subsection (2), if the Secretary decides that a person's debt indexation for a year is to be reduced, the Secretary must determine the number of days that the person was a very remote HELP debtor during the applicable calendar year. This number of days feeds into the formula in new subsection 140-10(1A) for calculating the person's indexation factor for the financial year.

Determinations by the Secretary that a person's HELP debt indexation is not to be reduced, and determinations by the Secretary of the number of days that a person was a very remote HELP debtor, are reviewable decisions (see item 12).

Section 142-15 - Reducing accumulated HELP debts

New section 142-15 will enable the Secretary to determine that a person's accumulated HELP debt is to be reduced in relation to a particular course of study. In order to do, the Secretary must be satisfied that the person:

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has been a very remote HELP debtor for a period of 4 years, or periods totalling 4 years within a continuous 6 year period; and

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has met such other requirements (if any) as are specified in those Guidelines.

The Secretary may only make such a determination once for a person in relation to a course of study in education (paragraph (1)(b)).

Under subsection (5), a person may apply to the Secretary for a reduction to their accumulated HELP debt. The application must be in writing, in the form approved by the Secretary and accompanied by the information required by the Secretary, include the person's tax file number, and otherwise meet any requirements specified in the Very Remote HELP Debtor Guidelines.

As for the indexation reduction measure (see section 142-10), the application needs to include the person's tax file number, as that information is essential for the administration of the debt reduction measure. Once the Secretary has determined that a person's accumulated HELP debt is to be reduced, the Secretary will need to provide the person's tax file number along with their other details to the ATO in order for the ATO to do the calculation of the person's accumulated HELP debt under the new subsection 140-25(1) (see items 9 and 10).

Under subsection (4), once the Secretary has received a person's application, the Secretary must determine whether to reduce the person's accumulated HELP debt within 28 days. If the Secretary decides that a person's debt is to be reduced, the amount of the reduction is worked out in accordance with subsection (2). That subsection provides that the amount by which a very remote HELP debtor's accumulated HELP debt is to be reduced is the lower of:

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the sum of the HECS-HELP debts and FEE-HELP debts that the person has incurred for the units forming part of their course of study in education (or, where those units have exceeded 5.0 EFTSL, the debts incurred for the first 5.0 EFTSL-worth of units); and

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the person's accumulated HELP debt at the start of the period during which the person was a very remote HELP debtor.

Because the amount worked out under subsection (2) might be more than the person's accumulated HELP debt when they apply for debt remittal, it is possible for the person's accumulated HELP debt to be reduced below $0 (see subsection (3)). In some cases, this might mean the person receives a HELP debt refund from the ATO (see s 142-20)).

Determinations by the Secretary that a person's HELP debt is not to be reduced, and calculations of the amount by which a person's HELP debt is to be reduced, are reviewable decisions (see item 12).

Section 142-20 - Refunding amounts

It is possible that, for some very remote HELP debtors, the amount by which their accumulated HELP debt is reduced under subsection 142-15 exceeds the current amount of their HELP debts and tax debts. Just as if the person had made a voluntary repayment of their HELP debts under Division 151 of HESA that exceeds the current amount of those debts and their tax debts, the person will become entitled to a refund of the excess.

New section 142-20 replicates the operation of section 151-15 in these circumstances, by obliging the Commonwealth to refund the person the amount by which the HELP debt reduction amount under section 142-15 exceeds their HELP debts and tax debts. These refunds will be administered by the ATO, and in the ordinary course of events, will be paid to the person after their income tax for the financial year in which the HELP debt reduction has been applied has been assessed.

The standing appropriation in section 238-12 of HESA will appropriate money from Consolidated Revenue Fund for the purpose of making those refunds.

Item 12 - Section 206-1 (after table item 2A)

Item 12 will amend the table in section 206-1 of HESA to provide that the Secretary's determinations under new sections 142-10 and 142-15 are reviewable decisions.

Item 13 - Subsection 238-10(1) (after table item 8)

Subsection 238-10(1) sets out the various Guidelines that the Minister is able to make under HESA, as well as the various provisions in the Act that relate to the making and content of those Guidelines. Item 13 will amend the table in that subsection to include the Very Remote HELP Debtor Guidelines.

Item 14 - Subclause 1(1) of Schedule 1

Item 14 will insert a new definition of ABS Remoteness Structure and new signpost definitions of course of study in education and very remote HELP debtor in Schedule 1 to HESA (Dictionary).

Part 2 - Application and transitional provisions

Item 15 - Application of amendments

Item 15 sets out how the very remote HELP debtor measures will apply.

Subitem 15(1) provides that the amendments to the way in which a person's indexation factor for a financial year is to be calculated apply in relation to the 2019-20 financial year and each later financial year.

Subitem (2) provides that, for the purposes of subsection 142-10(2), a day that occurs before 14 February 2019 must not be counted towards the number of days that a person is a very remote HELP debtor in 2019. In practice, this means that a person's indexation factor for the 2019-20 financial year is only reduced by the proportion of the period between 14 February and 31 December 2019 inclusive that they worked in a very remote location.

Subitem (3) provides that new section 142-15 applies in relation to courses of study completed at any time. However, subitem (4) also provides that the Secretary must not determine that a person was a very remote HELP debtor, for the purposes of section 142-15, in respect of a period starting before 1 January 2019. In practice, this means that the period of time that a person must have worked in a very remote location in order to obtain the benefit of the HELP debt reduction measure cannot start before 1 January 2019. So, for example, in the case of a teacher who will have to work in a very remote location for at least four years in order to obtain the benefit of the HELP debt reduction measure, the teacher will not be eligible for a reduction in their accumulated HELP debt until the end of 2023, at the earliest.