Senate

Revised Explanatory Memorandum

(Circulated by authority of the Minister for Small and Family Business, Skills and Vocational Education, Senator the Honourable Michaelia Cash)

Outline

The principal purpose of the Education and Other Legislation Amendment (VET Student Loan Debt Separation) Bill 2018 (Bill) is to separate VET student loan debts from other forms of Higher Education Loan Program debts (HELP debts) and establish VET student loans as a separate income contingent loan administered under the VET Student Loans Act 2016 (VSL Act). The amendments in the Bill operate together with amendments in the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018.

The Bill also amends the VSL Act to allow the courses and loan caps determination made by the Minister by legislative instrument under subsection 16(1) of the VSL Act (currently the VET Student Loans (Courses and Loan Caps) Determination 2016)), to incorporate, by reference, any matter contained in an instrument or other writing as in force from time to time.

VET student loans

Vocational education and training (VET) is central to Australia's economic growth, business opportunities and employment outcomes for students. Income contingent loans support Australians to access higher level VET qualifications.

The VSL Act, which commenced on 1 January 2017 as a part of a package of legislation, established the VET Student Loans program, a new Commonwealth program for income contingent loans for students engaged in higher level VET, to assist students with payment of their tuition fees. The new VET Student Loans program replaced the VET FEE-HELP scheme (which operated under Schedule 1A to the Higher Education Support Act 2003 (HESA)).

Under the VSL Act, the Secretary of the responsible Department (currently the Department of Education and Training) may approve VET student loans for eligible students for approved courses, and the loans are used by the Secretary to pay tuition fees for the students.

Under the current arrangements, payments of amounts of VET student loans give rise to 'VET student loan debts' under HESA. VET student loan debts are a type of HELP debt and are therefore dealt with in the same way as other HELP debts under Chapter 4 of HESA. Specifically, VET student loan debts are incorporated into, and are factored into the calculation of, a person's accumulated HELP debt, which can be repaid through voluntary repayments or compulsory repayments (based on the person's income) through the tax system.

Separating VET student loans debt from HELP debt

Currently, there is limited capacity to measure the sustainability of the VET Student Loans program because a debtor's HELP repayments are not disaggregated by loan type. Irrespective of whether the debt applies to HECS-HELP, FEE-HELP, SA-HELP, OS-HELP, or VET FEE-HELP assistance (which are other forms of HELP assistance available under HESA) or VET student loans, loan repayments are made towards a single, aggregated HELP debt.

This creates difficulties in that, where a person has received loans under more than one form of HELP assistance (for example, a person has received both HECS-HELP and VET student loans), it is not possible to obtain accurate data on what proportion of which form of HELP assistance has been repaid. Similarly, where a HELP debt is not being repaid, it is not possible to identify the form of HELP assistance the debt relates to.

This Bill separates VET student loan debts from other forms of HELP debts by moving the legislative basis for VET student loan debts from HESA into the VSL Act. In effect, this provides greater transparency of repayment rates for VET student loans and more accurate information to inform future policy decisions. The separation of VET student loan debts from other forms of HELP debts also enables more timely, transparent and accurate reporting on the fiscal sustainability of the VET Student Loans program. Further, it supports greater public accountability of the VET Student Loans program.

To achieve the separation of VET student loan debts from other forms of HELP debts, Schedule 1 to the Bill amends HESA and the VSL Act to:

•

provide that debts incurred under section 137-19 of HESA as in force at any time before 1 July 2019 are pre-1 July 2019 VSL debts. These debts continue to be administered as HELP debts under HESA and are subject to the repayment provisions in Chapter 4 of HESA

•

provide that if the Secretary uses an amount of a VET student loan approved under the VSL Act to pay tuition fees for a person on or after 1 July 2019, the person incurs a debt under the VSL Act. These debts are known as VETSL debts and are administered under the VSL Act

•

insert provisions in the VSL Act that are modelled on Chapter 4 of HESA to provide for the calculation and repayment of VETSL debts. The repayment thresholds, repayment rates, renewable HELP balance and indexation with respect to VETSL debts are the same as the repayment thresholds, repayment rates, renewable HELP balance and indexation for HELP debts under HESA

•

provide that a person must start repaying a debt in relation to a VET student loan once they have finished repaying any HELP debts

•

provide that, consistent with existing arrangements for HELP debts, persons residing overseas and who have a VETSL debt are required to make repayments in respect of those debts by paying a levy to the Commonwealth (refer also to the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018).

Schedule 1 to the Bill makes consequential amendments to other Commonwealth legislation, including taxation legislation and legislation establishing other income contingent loans, to:

•

reflect the establishment of VET student loans as separate income contingent loans

•

ensure that VETSL debts are repaid to the Commonwealth after a person has finished repaying any HELP debts, but before any debts relating to other income contingent loans and forms of student financial assistance.

VET Student Loans Courses and Loan Caps Determination

VET student loans are only available for courses which have been approved by the Minister through a courses and loan caps determination made by the Minister by legislative instrument under subsection 16(1) of the VSL Act (currently the VET Student Loans (Courses and Loan Caps) Determination 2016 (Determination)). The objective of the Determination is to list courses that have high national priority, align with industry needs, contribute to addressing skills shortages and lead to employment outcomes.

For a course to be added to the Determination it must meet a defined methodology. The methodology for approved courses is that courses must be current, and be subsidised by two state or territory lists, or be science, technology, engineering or mathematics courses, or be required for a licensed occupation.

The Determination is updated twice yearly. Once the Determination is made, VET student loans are approved only for the courses specified on the Determination. Courses are specified by reference to their course code. If a course becomes superseded or reaccredited, VET student loans cannot be approved for the new course until the next update to the Determination.

Schedule 2 to the Bill enables the resolution of this problem, by providing for the Determination to reference the National Register of VET.

The National Register, as defined in section 3 of the National Vocational Education and Training Regulator Act 2011, is a register that contains the most up to date information about VET courses and their status.

Schedule 2 to the Bill amends section 16 of the VSL Act to enable the Determination to incorporate, by reference, any matter contained in an instrument or other writing as in force from time to time. This lays the groundwork for the Determination to be amended, to refer to listed courses and new courses that replace those that become superseded or reaccredited, as specified on the National Register.

Referring to the National Register in the Determination will ensure the instrument reflects the dynamic nature of the VET system and retains its currency in relation to courses that are superseded or reaccredited. It is not possible for the Minister when making the Determination, to predict what courses will become superseded or reaccredited enough in advance, nor will those courses be allocated a course code until they are approved.

The National Register already has clear linkages between current and superseded or expired Training Packages. This ensures that student loans will only be able to be approved for courses that supersede Training Package courses on the National Register. Further changes to the National Register are being made to ensure accredited course updates are also clearly indicated. These changes are expected to be made before the current Determination is updated to refer to the National Register.

This change, enacted through Schedule 2 to the Bill, will mean students can be approved for VET student loans for courses that supersede those on the Determination or when a course is reaccredited without having to wait for the Determination to be updated.

Financial Impact Statement

The measure to separate VET student loans debts from other forms of HELP debts will cost $2.1 million over four years from 2017-18 for the Department of Education and Training to support the required IT changes at the Australian Taxation Office and Department of Education and Training.

These figures were published in December 2017 in the Mid-Year Economic Fiscal Outlook 2017-18. A breakdown of the costs (in underlying cash) over this period is as follows:

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Education and Other Legislation Amendment (VET Student Loan Debt Separation) Bill 2018

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 principal purpose of the Education and Other Legislation Amendment (VET Student Loan Debt Separation) Bill 2018 (Bill) is to separate VET student loan debts from other forms of Higher Education Loan Program debts (HELP debts) and establish VET student loans as separate income contingent loans. The amendments in the Bill operate together with amendments in the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018.

The Bill also amends the VET Student Loans Act 2016 (VSL Act) to allow the courses and loan caps determination made by the Minister by legislative instrument under subsection 16(1) of the VSL Act (currently the VET Student Loans (Courses and Loan Caps) Determination 2016)), to incorporate, by reference, any matter contained in an instrument or other writing as in force from time to time.

VET student loans

Vocational education and training (VET) is central to Australia's economic growth, business opportunities and employment outcomes for students. Income contingent loans support Australians to access higher level VET qualifications.

The VSL Act, which commenced on 1 January 2017 as a part of a package of legislation, established the VET Student Loans program, a new Commonwealth program for income contingent loans for students engaged in higher level VET, to assist students with payment of their tuition fees.

Under the VSL Act, the Secretary of the responsible Department (currently the Department of Education and Training) may approve VET student loans for eligible students for approved courses, and the loans are used by the Secretary to pay tuition fees for the students.

Under the current arrangements, payments of amounts of VET student loans give rise to 'VET student loan debts' under the Higher Education Support Act 2003 (HESA). VET student loan debts are a type of HELP debt and are therefore dealt with in the same way as other HELP debts under Chapter 4 of HESA. Specifically, VET student loan debts are incorporated into, and are factored into the calculation of, a person's accumulated HELP debt, which can be repaid through voluntary repayments or compulsory repayments (based on the person's income) through the tax system.

Separating VET student loans debt from HELP debt

Currently, there is limited capacity to measure the sustainability of the VET Student Loans program because a debtor's HELP repayments are not disaggregated by loan type. Irrespective of whether the debt applies to HECS-HELP, FEE-HELP, SA-HELP, OS-HELP, VET FEE-HELP assistance or VET student loans, loan repayments are made towards a single aggregated HELP debt.

This creates difficulties in that, where a person has received loans under more than one form of HELP assistance (for example, a person has received both HECS-HELP and VET student loans), it is not possible to obtain accurate data on what proportion of which form of HELP assistance has been repaid. Similarly, where a HELP debt is not being repaid, it is not possible to identify the form of HELP assistance the debt relates to.

The Bill separates VET student loan debts from other forms of HELP debts, by moving the legislative basis for VET student loan debts from HESA into the VSL Act. In effect, this provides greater transparency of repayment rates for VET student loans and more accurate information to inform future policy decisions. The separation of VET student loan debts from other forms of HELP debts also enables more timely, transparent and accurate reporting on the fiscal sustainability of the VET Student Loans program. Further, the Bill supports greater public accountability of the VET Student Loans program.

As a result of the amendments in the Bill, VET student loan debts incurred under HESA before 1 July 2019 continue to be administered as HELP debts and are subject to the repayment provisions in HESA, while VET student loan debts incurred from 1 July 2019 will be administered under, and will be subject to, repayment provisions in the VSL Act. The repayment thresholds, repayment rates, renewable HELP balance and indexation with respect to these debts are the same as the repayment thresholds, repayment rates, renewable HELP balance and indexation for HELP debts under HESA. A person must start repaying a debt in relation to a VET student loan once they have finished repaying any HELP debts.

Consistent with existing arrangements for HELP debts, persons residing overseas and who have a VET student loan debt will be required to make repayments in respect of those debts.

The amendments relating to the separation of VET student loan debts from other forms of HELP debts are contained in Schedule 1 to the Bill.

VET Student Loans Courses and Loan Caps Determination

VET student loans are only available for courses which have been approved by the Minister through a courses and loan caps determination made by the Minister by legislative instrument under subsection 16(1) of the VSL Act (currently the VET Student Loans (Courses and Loan Caps) Determination 2016 (Determination)). The objective of the Determination is to list courses that have high national priority, align with industry needs, contribute to addressing skills shortages and lead to employment outcomes.

The Determination is updated twice yearly. Once the Determination is made, VET student loans are approved only for the courses specified on the Determination. Courses are specified by reference to their course code. If a course becomes superseded or reaccredited, VET student loans cannot be approved for the new version of the course until the next update to the Determination.

Schedule 2 to the Bill enables the resolution of this problem, by providing for the Determination to reference the National Register of VET.

The National Register, as defined in section 3 of the National Vocational Education and Training Regulator Act 2011, is a register that contains the most up to date information about VET courses and their status.

Schedule 2 to the Bill amends section 16 of the VSL Act to enable the Determination to incorporate, by reference, any matter contained in an instrument or other writing as in force from time to time. This lays the groundwork for the Determination to be amended to refer to listed courses and new courses that replace them when they become superseded or reaccredited, as specified on the National Register.

Referring to the National Register in the Determination will ensure the instrument reflects the dynamic nature of the VET system and retains its currency in relation to courses that are superseded and reaccredited. This will mean students can be approved for VET student loans for these new courses without having to wait for the Determination to be updated.

Analysis of human rights implications

Right to Education

The Bill engages the right to education contained in Article 13 of the International Convention on Economic, Social and Cultural Rights (ICESCR).

Article 13 provides that vocational education is a part of secondary education (article 13(2)(b)), and secondary education must be available and accessible to all on the basis of capacity, by every appropriate means, and in particular by the progressive introduction of free education (article 13(2)(c)). It recognises the important personal, societal, economic and intellectual benefits of education, and provides that technical and vocational education should enable students to acquire knowledge and skills which contribute to their employability and enhance their productivity. Articles 13(3) and (4) of the ICESCR state that State Parties are obliged to establish "minimum education standards" to which all education institutions established are required to conform. They must also maintain a transparent and effective system to monitor such standards.

The measures in the Bill will have a positive effect on the provision of education services to students by VET providers. This Bill promotes this right through consolidating the legislative basis for the administration of the VET Student Loans program, increasing transparency over the VET Student Loans program and ensuring its fiscal sustainability into the future.

By enabling the Determination to incorporate, by reference, matters contained in other instruments or writing, as in force from time to time (most relevantly information published on the National Register), the Determination will refer to the most up to date information on nationally recognised VET courses, so that VET student loans for students can be approved for courses listed in the Determination, and new courses that replace them, when they become superseded or reaccredited, without having to wait for updates to the Determination. This ensures the legislative framework according to which financial assistance is provided to students in the VET sector has legal efficacy and reflects the dynamic nature of the VET sector.

The Bill is compatible with and promotes the right to education.

The right to work

The Bill engages the right to work and rights in work which are set out in Articles 6, 7 and 8 of the ICESCR.

Article 6(1) specifies that State Parties are required to recognise the right to work, which includes the right of everyone to the opportunity to gain their living by work which they freely choose or accept. The labour market is to be open to everyone and there can be no discrimination in access to and maintenance of employment on the grounds enumerated in Article 2 of the ICESCR, including birth or status.

Article 6(2) recognises the steps to be taken by a State Party to achieve the full realisation of this right including providing technical and vocational guidance and training programs.

The measures in this Bill to separate VET student loan debts from other forms of HELP debts will have a positive effect on ensuring this right by increasing the transparency of the VET Student Loans program, and ensuring its fiscal viability into the future. The measures will allow greater transparency over the performance and sustainability of the VET Student Loan program, which in turn, ensures ongoing access to VET student loans by students to financially support them to enter into and undertake vocational education training that is freely chosen, meets workplace needs, and improves their employment opportunities and outcomes.

The Bill is compatible with and promotes the right to work.

Conclusion

The Bill is compatible with human rights.

Notes on Clauses

Clause 1 - Short title

Clause 1 provides for the Act to be the Education and Other Legislation Amendment (VET Student Loan Debt Separation) Act 2018.

Clause 2 - Commencement

Subclause 2(1) contains 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.

The table in subclause 2(1) provides for the following commencement times:

1.

Sections 1 to 3 and anything in the Act not otherwise covered by the table, commence on the day the Act receives the Royal Assent.

2.

Items 1 to 25 of Schedule 1 commence on 1 July 2019.

2A.

Item 25A of Schedule 1 commences on 1 January 2020, immediately after Schedule 3 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences.

2B.

Items 26 to 35 of Schedule 1 commence on 1 July 2019.

3.

Items 36 to 38 of Schedule 1 commence on 1 July 2019. However, the provisions do not commence at all if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences on that day. This is because items 36 to 38 of Schedule 1 amend a provision in the Social Security Act 1991 as currently in force, but that provision is also amended by Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018. Therefore, items 36 to 38 of Schedule 1 will not commence if the amendments in Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commence. In that case, item 39 will commence.

4.

Item 39 of Schedule 1 commences immediately after the start of 1 July 2019. However, the provision does not commence at all if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 does not commence on that day. This is because item 39 is an alternative to items 36 to 38, and amends a provision in the Social Security Act 1991 as amended by Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018. Therefore, the amendment in item 39 commences immediately after the commencement of Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018.

5.

Item 40 of Schedule 1 commences on 1 July 2019, immediately after Schedule 3 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences.

6.

Items 41 to 43 of Schedule 1 commence on 1 July 2019.

7.

Item 44 of Schedule 1 commences on 1 July 2019. However, the provision does not commence at all if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences on that day. This is because item 44 amends a provision in the Student Assistance Act 1973 that is also amended by Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 and the amendment in item 44 is only necessary if the amendment in Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 does not commence.

8.

Item 45 of Schedule 1 commences immediately after the start of 1 July 2019. This is because the amendment in item 45 is required irrespective of whether Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences or not.

Item 45 of Schedule 1, and Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018, amend the same provision in the Student Assistance Act 1973. Therefore, if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences, item 45 of Schedule 1 will amend subsection 10F(1) of the Student Assistance Act 1973 as amended by Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018. However, if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 does not commence, item 45 of Schedule 1 will amend subsection 10F(1) of the Student Assistance Act 1973 as currently in force.

9.

Item 46 of Schedule 1 commences on 1 July 2019, immediately after Schedule 3 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences.

10.

Items 47 to 51 of Schedule 1 commence on 1 July 2019.

11.

Item 52 of Schedule 1 commences on 1 July 2019. However, the provision does not commence at all if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 does not commence on that day. This is because the amendment in item 52 of Schedule 1 updates a cross-reference to a definition in subsection 1061ZVHA(1) of the Social Security Act 1991 as a result of amendments in Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018.

12.

Items 53 to 71 of Schedule 1 commence immediately after the start of 1 July 2019. This is because the amendment in item 71 of Schedule 1 is required irrespective of whether Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences or not.

Item 71 of Schedule 1, and Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018, amend the same provision in the Trade Support Loans Act 2014. Therefore, if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences, item 71 of Schedule 1 will amend subsection 46(1) of the Trade Support Loans Act 2014 as amended by Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018. However, if Schedule 2 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 does not commence, item 71 of Schedule 1 will amend subsection 46(1) of the Trade Support Loans Act 2014 as currently in force.

13.

Items 71A to 76 commence on 1 January 2020, immediately after Schedule 3 to the Higher Education Support Legislation Amendment (Student Loan Sustainability) Act 2018 commences.

14.

Schedule 2 commences the day after the Act receives the Royal Assent.

The Note at the end of subclause 2(1) clarifies that the table relates only to the provisions of this Act as originally enacted and it will not be amended to deal with any later amendments of the Act.

Subclause 2(2) provides that any information in column 3 of the table is not part of the Act, and information may be inserted in column 3, or information in it may be edited, in any published version of the Act.

Clause 3 - Schedules

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 concerned and that any other item in a Schedule has effect according to its terms.

LIST OF ABBREVIATIONS

Schedule 1 - Separation of VET student loan debts from HELP debts

Summary

Part 1 of Schedule 1 to the Bill amends HESA and the VSL Act to separate VET student loan debts from other forms of HELP debts. To achieve this, the amendments in Schedule 1:

•

provide that debts incurred under section 137-19 of HESA, as in force at any time before 1 July 2019, are pre-1 July 2019 VSL debts. These debts continue to be administered as HELP debts under HESA and are subject to the repayment provisions in Chapter 4 of HESA

•

provide that if the Secretary uses an amount of a VET student loan approved under the VSL Act to pay tuition fees for a person on or after 1 July 2019, the person incurs a debt under the VSL Act. These debts are known as VETSL debts and are administered under the VSL Act

•

insert provisions in the VSL Act that are modelled on Chapter 4 of HESA to provide for the calculation and repayment of VETSL debts. The repayment thresholds, repayment rates and indexation with respect to VETSL debts are the same as the repayment thresholds, repayment rates and indexation for HELP debts under HESA. A person must start repaying a debt in relation to a VET student loan once they have finished repaying any HELP debts

•

provide that, consistent with existing arrangements for HELP debts, persons residing overseas who have a VETSL debt are required to make repayments in respect of those debts by paying a levy to the Commonwealth (refer also to the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018).

Part 2 of Schedule 1 to the Bill makes consequential amendments to other Commonwealth legislation, including taxation legislation and legislation establishing other income contingent loans, to:

•

reflect the establishment of VET student loans as separate income contingent loans, and

•

ensure that VETSL debts are repaid to the Commonwealth after a person has finished repaying any HELP debts, but before any debts relating to other income contingent loans and forms of student financial assistance.

Detailed explanation

Part 1 - Main amendments

Higher Education Support Act 2003

Items 1 and 2 - Section 129-1

Section 129-1 of HESA describes what 'Chapter 4 - Repayment of loans' is about.

Item 1 amends section 129-1 by inserting the words "(before 1 July 2019) under" after the words "Schedule 1A or".

This is an administrative amendment to ensure the description in section 129-1 of HESA provides that the loans the Commonwealth makes to students under Schedule 1A to HESA, or under the VSL Act before 1 July 2019, are repayable under Chapter 4 of HESA. However, the repayment of loans that the Commonwealth makes to students under the VSL Act on or after 1 July 2019 are repayable under Part 3A of the VSL Act.

Item 2 adds a Note at the end of section 129-1 of HESA. The Note clarifies that loans the Commonwealth makes to students under the VSL Act on or after 1 July 2019 are repayable under the VSL Act.

Items 3 and 4 - Section 134-1

Section 134-1 of HESA describes what 'Part 4-1 - Indebtedness' of HESA is about.

Item 3 amends section 134-1 by deleting the words "also incurs a HELP debt if the Secretary uses" and replaces them with "will also have incurred a HELP debt if (before 1 July 2019) the Secretary used".

This is an administrative amendment to ensure the description in section 134-1 of HESA provides that a person incurs a HELP debt if, before 1 July 2019, the Secretary used an amount of a VET student loan approved under the VSL Act to pay tuition fees for the person.

Item 4 adds a Note at the end of section 134-1 of HESA. The Note clarifies that if the Secretary uses an amount of a VET student loan approved under the VSL Act to pay tuition fees for a person on or after 1 July 2019, the person incurs a debt under the VSL Act.

Item 5 - Paragraph 137-1(e)

Section 137-1 of HESA specifies which debts are 'HELP debts' for the purposes of HESA. Currently, section 137-1 provides that VET student loan debts are HELP debts.

Item 5 repeals and substitutes paragraph 137-1(e). Under new paragraph 137-1(e), pre-1 July 2019 VSL debts are HELP debts.

This is a consequential amendment to items 6-9 below, so that only pre-1 July 2019 VSL debts are HELP debts.

Items 6 to 9 - Section 137-19

Section 137-19 of HESA concerns VET student loan debts.

Item 6 repeals and replaces the heading of section 137-19 of HESA with "137-19 Pre-1 July 2019 VSL debts". This is a consequential amendment to reflect that HESA only deals with pre-1 July 2019 VSL debts, being a debt incurred under section 137-19 of HESA as in force at any time before 1 July 2019.

Subsections 137-19(1),(2) and (3) of HESA deal with when a person incurs a VET student loan debt to the Commonwealth, and the amount of the VET student loan debt.

Item 7 repeals subsections 137-19(1), (2) and (3) of HESA and replaces them with a new subsection 137-19(1).

New subsection 137-19(1) provides that a debt incurred under section 137-19 of HESA as in force at any time before 1 July 2019 is a 'pre-1 July 2019 VSL debt'. This is an administrative amendment to reflect that HESA only deals with pre-1July 2019 VSL debts, being a debt incurred under section 137-19 of HESA as in force at any time before 1 July 2019.

By virtue of subsection 7(2) of the Acts Interpretation Act 1901, the repeal of subsections 137-19(1), (2) and (3) does not affect any debts incurred under those provisions prior to their repeal.

Item 8 repeals the heading for subsection 137-19(4) of HESA, which deals with the remission of VET student loan debts. Given the other amendments to section 137-19 of HESA, this heading is no longer required.

Subsection 137-19(4) of HESA deals with the remission of VET student loan debts.

Item 9 amends subsection 137-19(4) of HESA by deleting the words "VET student loan debt in relation to a loan amount" and replacing them with "*pre-1 July 2019 VSL debt, in relation to a loan amount (within the meaning of this section as in force at the time the debt was incurred)".

This change is consequential to the substantive changes to section 137-19 of HESA and reflects the fact that, as a result of the separation of VET student loan debts from other forms of HELP debts, this provision only deals with the remission of a pre-1 July 2019 VSL debt (being a debt incurred under section 137-19 of HESA as in force at any time before 1 July 2019). As amended, subsection 137-19(4) provides that a person's pre-1 July 2019 debt, in relation to a loan amount (within the meaning of section 137-19(4) as in force at the time the debt was incurred), is taken to be remitted if the person's FEE-HELP balance is re-credited under Part 6 of the VSL Act in relation to the loan amount. New subsection 23BA(4) in the VSL Act (refer to Item 20) deals with the remission of VETSL debts (being debts incurred under section 23BA of the VSL Act on or after 1 July 2019).

Subsection 137-19(4) is not being renumbered to preserve the effectiveness of amendments to this provision in Schedule 3 to the SLS Bill.

Item 10 - Paragraph 180-28(6)(c)

Section 180-28 of HESA deals with the disclosure and use of 'Higher Education Support Act information' for the 'HELP program'. For the purposes of section 180-28, 'Higher Education Support Act information' includes 'VET information' (as defined in section 6 of the VSL Act) (subsection 128-28(9), and 'HELP program' includes assistance provided to students under the VSL Act and repayment of debts under Chapter 4 of HESA in relation to that assistance (paragraph 180-28(6)(b) and (c)).

This item amends paragraph 180-28(6)(c) by inserting the words ", or under the VET Student Loans Act 2016," after the words "Chapter 4". This is a consequential change to reflect the fact that VETSL debts are repayable under the VSL Act.

This amendment ensures that the definition of 'HELP program' for the purposes of section 180-28 includes the repayment of debts under Chapter 4 of HESA, or under the VSL Act, incurred in relation to that assistance.

Items 11 and 12 - Subclause 1(1) of Schedule 1

Subclause 1(1) of Schedule 1 to HESA contains definitions for defined terms used in HESA.

Item 11 amends subclause 1(1) by inserting a new definition of pre-1 July 2019 VSL debt which has the meaning given by subsection 137-19(1) of HESA (as amended by item 7of this Schedule).

Item 12 amends subclause 1(1) of Schedule 1 to HESA by repealing the definition of VET student loan debt. That definition is no longer required as it is being replaced by the definition of pre-1 July 2019 VSL debt.

VET Student Loans Act 2016

Items 13 and 14 - Section 5

Section 5 of the VSL Act provides a simplified outline of the VSL Act. Items 13 and 14 amend the simplified outline to reflect the new arrangements for VETSL debts (being debts to the Commonwealth incurred on or after 1 July 2019 as a result of payments of loan amounts under the VSL Act (refer to new subsection 23BA(a))), as debts managed under the VSL Act rather than HESA.

Item 13 amends section 5 by deleting the words "HELP debt. HELP debts are managed under the Higher Education Support Act 2003" and replacing them with "VETSL debt. These debts are generally repayable through the tax system when the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act".

This amendment updates the simplified outline to provide that if the Secretary uses a loan amount to pay tuition fees, the student incurs a VETSL debt that is repayable through the tax system when the person's income exceeds the minimum repayment income as prescribed in HESA and the person has finished paying any debts they owe under HESA.

Item 14 amends section 5 by deleting the words "and the approval of course providers" and replacing them with ", approval of course providers, and assessments involving repayment of VETSL loan debts,".

This amendment updates the simplified outline to provide that certain decisions relating to assessments involving repayments of VETSL debts are reviewable decisions under the VSL Act. This amendment reflects that as a result of amendments made to HESA and the VSL Act by this Bill, the legislative basis for certain decisions has moved from HESA to the VSL Act.

Items 15 to 17 - Section 6

Section 6 of the VSL Act defines certain terms used in the VSL Act.

Item 15 amends section 6 by inserting definitions for the following new defined terms:

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accumulated VETSL debt

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approved form

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assessed worldwide income

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compulsory VETSL repayment amount

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foreign resident

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former accumulated VETSL debt

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income tax

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income year

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Medicare levy

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minimum repayment income

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repayable VETSL debt

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repayment income

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return

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taxable income

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VETSL debt

These new defined terms are consequent upon the insertion of new Part 3A into the VSL Act (see item 20).

Most new terms are defined by reference to provisions in the VSL Act, HESA or other Commonwealth legislation.

Compulsory VETSL repayment amount means an amount that: (a) is required to be paid in respect of an accumulated VETSL debt under specified provisions of the VSL Act; and (b) is included in a notice of assessment made under section 23EE of the VSL Act. This term is used in new Part 3A of the VSL Act.

Item 16 amends section 6 by repealing the definition of VET student loan debt as it is no longer needed and has been replaced by the new definition for VETSL debt.

Item 17 amends section 6 by inserting a definition for voluntary repayment which is a payment made to the Commissioner, on a voluntary basis, in discharge of an accumulated VETSL debt, and does not include a payment made in discharge of a compulsory VETSL repayment amount. This definition is equivalent to the existing definition of 'voluntary repayment' used in HESA, but it relates to VETSL debts incurred under the VSL Act.

Item 18 - Subsection 19(4) (note)

Section 19 of the VSL Act deals with VET student loans approved by the Secretary and how they must be used.

This item repeals the Note to subsection 19(4) and replaces it with the following two new Notes:

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new Note 1 clarifies that if the Secretary uses a loan amount to pay tuition fees for a student, the student incurs a VETSL debt under section 23BA of the VSL Act

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new Note 2 clarifies that if the Secretary used a loan amount to pay tuition fees for a student before 1 July 2019, the student will have incurred a debt under section 137-19 of HESA as then in force, and those debts are managed under HESA as HELP debts.

The Notes remind the reader of the different treatment of debts incurred before 1 July 2019 and on or after 1 July 2019.

Item 19 - Subsection 22(1) (note 2)

Subsection 22(1) deals with when a course provider must repay a loan amount to the Commonwealth.

This item amends Note 2 under subsection 22(1) by deleting the words "VET student loan debt is taken to be remitted to the extent to which the VET student loan debt relates to the loan amount concerned: see section 137-19 of the Higher Education Support Act 2003" and replacing them with "VETSL debt is taken to be remitted to the extent to which the debt relates to the loan amount concerned: see section 23BA (For remission of debts incurred before 1 July 2019, see section 137-19 of the Higher Education Support Act 2003)".

This amendment replaces the wording in the Note so as to clarify that if a student's FEE-HELP balance is re-credited:

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the student's VETSL debt is taken to be remitted to the extent to which the debt relates to the loan amount concerned, as per section 23BA of the VSL Act, or

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if the student's debt was incurred before 1 July 2019, the student's debt is taken to be remitted to the extent to which the debt relates to the loan amount concerned, as per section 137-19 of HESA.

Item 20 - After Part 3

This item inserts a new 'Part 3A - VETSL debts' into the VSL Act. This ensures that VET student loan debts incurred by students on or after 1 July 2019 (VETSL debts) are administered under the VSL Act rather than HESA.

New Part 3A consists of the following Divisions:

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Division 1 - Simplified outline of this Part (section 23AA)

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Division 2 - VETSL debts (sections 23BA to 23BC)

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Division 3 - Accumulated VETSL debts (sections 23CA to 23CF)

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Division 4 - Voluntary discharge of debt (sections 23DA to 23DC)

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Division 5 - Compulsory discharge of debt (sections 23EA to 23EH)

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Division 6 - Application to tax legislation (sections 23FA to 23FF).

New Part 3A deals with when VETSL debts are incurred, the calculation of accumulated VETSL debts and discharge of VETSL debts through voluntary or compulsory repayments through the tax system.

The arrangements for VETSL debts are consistent with existing arrangements for VET student loan debts under HESA and other forms of HELP debts. For this reason, new Part 3A is modelled on existing provisions in Chapter 4 of HESA that deal with when HELP debts are incurred, the calculation of accumulated HELP debts and discharge of HELP debts (which currently apply to VET student loan debts as a type of HELP debts).

Division 1 - Simplified outline of this Part

Section 23AA Simplified outline of this Part

This item inserts new section 23AA, which contains the simplified outline for new Part 3A.

Simplified outlines are included to assist readers to understand the substantive provisions, but they are not intended to be comprehensive and readers should rely on the substantive provisions.

Division 2 - VETSL debts

Section 23BA VETSL debt

New section 23BA deals with debts a person may incur to the Commonwealth under the VSL Act, called VETSL debts. This provision is modelled on section 137-19 of HESA in its current form.

New subsection 23BA(1) deals with when a person incurs a VETSL debt. New subsection 23BA(1) provides that a person incurs a debt to the Commonwealth if the Secretary:

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approves a VET student loan for the person, and

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uses a loan amount covered by the VET student loan to pay tuition fees for the person for a course.

A debt incurred by a person in this manner is a VETSL debt.

New subsection 23BA(2) deals with the amount of a VETSL debt. New subsection 23BA(2) provides that the amount of the VETSL debt is either:

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120% of the loan amount, or

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if the rules specify a lesser percentage of the loan amount for the person, that lesser percentage of the loan amount.

The Note following subsection 23BA(2) refers to subsection 13(3) of the Legislation Act 2003, which permits specification by class.

New subsection 23BA(3) deals with when a VETSL debt is incurred. New subsection 23BA(3) provides that a VETSL debt is incurred on the day that the Secretary pays the loan amount.

New subsection 23BA(4) deals with the remission of VETSL debts. New subsection 23BA(4) provides that a person's VETSL debt, in relation to a loan amount used to pay tuition fees for the person for a course, is taken to be remitted if the person's FEE-HELP balance is re-credited under Part 6 of the VSL Act in relation to the loan amount.

Section 23BB VETSL debt discharged by death

New section 23BB, which is modelled on section 137-20 of HESA, provides that a VETSL debt is taken to have been paid to the Commonwealth upon the death of the person who owes the VETSL debt to the Commonwealth.

The Note following section 23BB clarifies that VETSL debts are not provable in bankruptcy and refers to subsection 82(3AB) of the Bankruptcy Act 1966 (also refer to Item 25 which amends the Bankruptcy Act 1966).

Section 23BC Notice to Commissioner

New subsection 23BC(1) provides that if a person incurs a VETSL debt, the Secretary must give the Commissioner a notice specifying the amount of the debt incurred by the person.

New subsection 23BC(2) provides that the Secretary may include in the notice (provided to the Commissioner under subsection 23BC(1)) any other details the Commissioner requests for the purposes of ensuring the Commissioner has the information needed to exercise powers or perform functions of the Commissioner under, or in relation to, the VSL Act.

New section 23BC supports the Commissioner's administration of Part 3A of the VSL Act (see new section 23FF).

Division 3 - Accumulated VETSL debts

Section 23CA Simplified outline of this Division

New section 23CA provides a simplified outline of Division 3 and summarises the two stages to working out a person's accumulated VETSL debt for a financial year. Stage 1 is described in further detail in new section 23CB, and stage 2 is described in further detail in new section 23CC.

The Note following new section 23CA clarifies that incurring a financial year's accumulated VETSL debt discharges the previous accumulated VETSL debt and VETSL debts, and refers to new section 23CE.

Section 23CB Stage 1 - working out a former accumulated VETSL debt

New section 23CB provides for how to work out a person's former accumulated VETSL debt for a financial year (stage 1 of the calculation of a person's accumulated VETSL debt). This provision is modelled on section 140-5 of HESA.

New subsection 23CB(1) inserts a definition of former accumulated VETSL debt into the VSL Act which provides that a person's former accumulated VETSL debt, in relation to the person's accumulated VETSL debt for a financial year, is worked out by multiplying:

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the amount worked out using the method statement (set out in the table in subsection 23CB(1)), by

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the HELP debt indexation factor (within the meaning of HESA) for 1 June in that financial year.

The table in new subsection 23CB(1) prescribes the method statement referred to in paragraph 23CB(1)(a). According to the method statement there are six steps to working out a former accumulated VETSL debt for a person.

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step 1 involves taking the person's accumulated VETSL debt for the immediately preceding financial year. If the person has no accumulated VETSL debt for that financial year, this amount is taken to be zero.

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step 2 involves adding the sum of all of the VETSL debts (if any) that the person incurred during the last six months of the immediately preceding financial year (i.e. 1 January to 30 June) (if the total is a number of whole dollars and a number of cents, then the total is the number of whole dollars - but if the total is an amount of less than one dollar, then the total is zero).

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step 3 involves subtracting the sum of the amounts by which the person's debts referred to in steps 1 and 2 are reduced because of any voluntary repayments that have been made during the following periods:

a.

starting on 1 June in the immediately preceding financial year, and

b.

ending immediately before the next 1 June.

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step 4 involves subtracting the sum of all of the person's compulsory VETSL repayment amounts that:

a.

were assessed during that period (excluding any assessed as a result of a return given before that period), or

b.

were assessed after the end of that period as a result of a return given before the end of that period.

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step 5 involves subtracting the sum of the amounts by which any compulsory VETSL repayment amount of the person is increased (whether as a result of an increase in the person's taxable income of an income year or otherwise) by an amendment of an assessment made during that period.

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step 6 involves adding the sum of the amounts by which any compulsory VETSL repayment amount of the person is reduced (whether as a result of a reduction in the person's taxable income of an income year or otherwise) by an amendment of an assessment made during that period.

An example of how to work out a former accumulated VETSL debt in accordance with section 23CB is provided under subsection 23CB(1).

New subsection 23CB(2) provides that, for the purposes of new section 23CB, an assessment or an amendment of an assessment, is taken to have been made on the day specified in the notice of assessment, or notice of amended assessment, as the date of issue of that notice.

Section 23CC Stage 2 - working out an accumulated VETSL debt

New section 23CC deals with describing 'stage 2' for working out a person's accumulated VETSL debt for a financial year. This provision is modelled on section 140-25 of HESA.

New subsection 23CC(1) prescribes a method for working out a person's 'accumulated VETSL debt' for a financial year which is:

New subsection 23CC(1) also defines the following terms used in the method for working out a person's accumulated VETSL debts for a financial year:

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former accumulated VETSL debt means the person's former accumulated VETSL debt in relation to that accumulated VETSL debt;

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VETSL debt repayments means the sum of all of the voluntary repayments (if any) paid on or after 1 July in the financial year and before 1 June in that year, in reduction of the VETSL debts incurred in that year;

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VETSL debts incurred means the sum of the amounts of all of the VETSL debts (if any) incurred during the first 6 months of the financial year (i.e. 1 July to 31 December) - with the total rounded down to the nearest whole dollar (or to zero if the total is less than one dollar).

An example of how to work out a former accumulated VETSL debt in accordance with section 23CC is provided under subsection 23CC(1).

New subsection 23CC(2) provides that a person incurs the accumulated VETSL debt on 1 June in the financial year.

New subsection 23CC(3) provides that the first financial year for which a person can have an accumulated VETSL debt is the financial year starting on 1 July 2019.

Section 23CD Rounding of amounts

New section 23CD deals with how amounts of a person's accumulated VETSL debt are to be rounded off, and is modelled on section 140-30 of HESA.

New subsection 23CD(1) provides that if, apart from section 23CD, a person's accumulated VETSL debt would be an amount consisting of a number of whole dollars and a number of cents, the cents are to be disregarded.

New subsection 23CD(2) provides that if, apart from section 23CD, a person's accumulated VETSL debt would be an amount of less than one dollar, the person's accumulated VETSL debt is taken to be zero.

The effect of new section 23CD is that where a person's accumulated VETSL debt is a figure of dollars and cents it is reduced to the whole dollar amount (without the cents).

Section 23CE Accumulated VETSL debt discharges earlier debts

New section 23CE deals with when a person's accumulated VETSL debt discharges earlier debts. It is modelled on section 140-35 of HESA.

New subsection 23CE(1) provides that the accumulated VETSL debt that a person incurs on 1 June in a financial year discharges, or discharges the unpaid part of, any VETSL debt that the person incurred during the calendar year immediately preceding that day, and any accumulated VETSL debt that the person incurred on the immediately preceding 1 June.

Subsection 23CE(2) provides that nothing in subsection 23CE(1) affects the application of Division 2 or section 23CB or section 23CC.

Section 23CF Accumulated VETSL debt discharged by death

New section 23CF deals with discharge by death of a person's accumulated VETSL debt.

New subsection 23CF(1) provides that, upon the death of a person who has an accumulated VETSL debt, the accumulated VETSL debt is taken to be discharged.

New subsection 23CF(2) provides that, to avoid doubt, section 23CF does not affect any compulsory VETSL repayment amounts required to be paid in respect of the accumulated VETSL debt, whether or not those amounts were assessed before the person's death.

The Note at the end of new section 23CF clarifies that accumulated VETSL debts are not provable in bankruptcy, and refers to subsection 82(3AB) of the Bankruptcy Act 1966 (also refer to Item 25 which amends the Bankruptcy Act 1966).

Division 4 - Voluntary discharge of debt

Division 4 deals with voluntary repayments by a person to discharge their VETSL debt to the Commonwealth. It provides that a person may make voluntary repayments in respect of a debt owed to the Commonwealth under Part 3A, makes provision for how those voluntary repayments must be applied and requires the Commonwealth to refund overpayments.

Section 23DA Voluntary repayments

New section 23DA deals with the voluntary repayment of debts under the VSL Act, and is modelled on section 151-1 of HESA.

New subsection 23DA(1) provides that a person may at any time make a payment in respect of a debt that the person owes to the Commonwealth under Part 3A of the VSL Act.

New subsection 23DA(2) provides the payment must be made to the Commissioner.

Section 23DB Application of voluntary repayments

New section 23DB deals with how voluntary repayments are to be applied in payment of the debtor's debts. This provision is modelled on section 151-10 of HESA.

New subsection 23DB(1) provides that any money a person pays under Division 4, to meet the person's debts to the Commonwealth under Part 3A, is to be applied in payment of those debts as the person directs at the time of payment.

New subsection 23DB(2) provides that if the person has not given any directions as to how payments are to be applied in payment of their debts, or the directions given do not adequately deal with the matter, any money available is to be applied:

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firstly, in discharge or reduction of any accumulated VETSL debt of the person, and

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secondly, in discharge or reduction of any VETSL debt of the person, or if there is more than one such debt, those debts in the order in which they were incurred.

Section 23DC Refunding of payments

New section 23DC provides for the refunding of excess voluntary repayments made to the Commonwealth. It is modelled on section 151-15 of HESA.

If a person pays an amount to the Commonwealth under Division 4, and the amount exceeds the sum of:

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the amount required to discharge the total debt that the person owed to the Commonwealth under Part 3A of the VSL Act, and

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the total amount of the person's primary tax debts (within the meaning of Part IIB of the Taxation Administration Act 1953)

the Commonwealth must refund to the person an amount that is equal to the excess payment made to the Commonwealth. This ensures a person does not repay amounts to the Commonwealth that exceed the amount of the debts they owe to the Commonwealth under the VSL Act and other taxation laws.

Division 5 - Compulsory discharge of debt

New Division 5 deals with the compulsory repayments of debts incurred under Part 3A. Subdivision A of Division 5 deals with the circumstances under which a person is liable to repay a VETSL debt to the Commonwealth, while Subdivision B deals with the liability of persons who are residents overseas to repay accumulated VETSL debts to the Commonwealth. Together with the amendments in the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018, Subdivision B ensures a person is liable to repay their debts under the VSL Act to the Commonwealth even if they reside overseas.

Subdivision A - Compulsory repayments

Section 23EA Compulsory repayments

New section 23EA deals with a person's liability to repay a VETSL debt to the Commonwealth. It is modelled on section 154-1 of HESA.

New subsection 23EA(1) specifies the circumstances in which a person must make compulsory repayments to the Commonwealth in relation to their VETSL debt. It provides that if:

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a person's repayment income for an income year exceeds the minimum repayment income for the income year, and

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on 1 June immediately preceding the making of an assessment in respect of the person's income of that income year, the person had an accumulated VETSL debt

the person is liable to pay the Commonwealth, in accordance with Division 5, so much of the person's repayable VETSL debt for the income year as does not exceed the amount worked out using the formula set out in subsection 23EA(1). The formula is:

The term 'minimum repayment income' has the same meaning as in HESA, so that a person is required to make repayments if the person's income exceeds the repayment threshold for the repayment of HELP debts.

New subsection 23EA(1) also defines the following terms used in the formula set out in subsection 23EA(1):

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applicable percentage of repayment income - this is worked up by reference to the table in section 154-20 of HESA, so that the applicable percentage rates for the compulsory repayments of VETSL debts under the VSL Act are the same as the applicable percentage rates for the compulsory repayments of HELP debts under HESA

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relevant income-contingent loans liability - this means the sum of any amounts the person is liable to pay under section 154-1 and 154-16 of HESA, and ensures that a person starts repaying an accumulated VETSL debt after the person has finished repaying any HELP debts under HESA.

New subsection 23EA(2) provides that a person is not liable under section 23EA for an income year if the amount worked out under subsection 23EA(1) is zero or less.

New subsection 23EA(3) provides a person is not liable under section 23EA to pay an amount for an income year if, under section 8 of the Medicare Levy Act 1986:

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no Medicare levy is payable by the person on the person's taxable income for the income year, or

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the amount of the Medicare levy payable by the person on the person's taxable income for the income year is reduced.

Section 23EB Repayable VETSL debt for an income year

New section 23EB defines a person's 'repayable VETSL debt'. This provision is modelled on section 154-15 of HESA.

New subsection 23EB provides that a person's repayable VETSL debt for an income year is either:

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the person's accumulated VETSL debt referred to in paragraph 23EA(1)(b) in relation to that income year, or

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if one or more amounts:

o

have been paid in reduction of that debt, or

o

have been assessed under section 23EE to be payable in respect of that debt

the amount (if any) remaining after deducting from that debt the amount, or sum of the amounts, so paid or assessed to be payable.

New subsection 23EB(2) provides that a reference in paragraph 23EB(1)(b) to an amount assessed to be payable is, if the amount has been increased or reduced by an amendment of the relevant assessment, a reference to the increased amount or the reduced amount.

Subdivision B - Levy for overseas debtors

Section 23EC Liability of overseas debtors to repay amounts

New section 23EC deals with the liability of persons who are foreign residents and have an accumulated VET student loan debt. The provision must be read in conjunction with the amendments in the Student Loans (Overseas Debtors Repayment Levy) Amendment Bill 2018 - together they ensure that a person is liable to repay their accumulated VETSL debts even if they reside overseas.

New subsection 23EC(1) provides that if:

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a person is a foreign resident during an income year, and

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the person's assessed worldwide income for the income year exceeds the minimum repayment income for the income year, and

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on 1 June immediately preceding the making of an assessment in respect of the person's income of that income year, the person had an accumulated VETSL debt,

the person is liable to pay to the Commonwealth, in accordance with Division 5, a levy of the amount that is worked out under subsection 23EC(2).

The Note after new subsection 23EC(1) clarifies that an amount a person is liable to pay under section 23EC is imposed as a levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015. The imposition of the levy through a separate Commonwealth Act is required by section 55 of the Constitution.

New subsection 23EC(2) describes how the amount of a levy a person is liable to pay under new section 23EC is calculated. It provides that the amount of levy a person is liable to pay in respect of an income year, is an amount equal to the difference between:

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the amount that the person would have been liable to pay under section 23EA if:

o

the person had a repayment income for the income year of an amount equal to the person's assessed worldwide income for the year, and

o

subsection 23EA(3) did not apply to the person,

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and the amount (if any) the person is liable to pay under section 23EA, in respect of the income year.

New section 23EC is modelled on section 154-16 of HESA.

Section 23ED Notices to be given to the Commissioner

New section 23ED, which is modelled on section 154-18 of HESA, deals with the notices a person must provide to the Commissioner in relation to their leaving Australia, their absence from Australia and their income (including foreign-sourced income). These notices may be used by the Commissioner when making an assessment under Subdivision C about an amount to be paid under section @154-16.

Notices relating to leaving Australia

New subsection 23ED(1) deals with the circumstances in which a person who has a VETSL debt and leaves Australia must provide notice to the Commissioner. If a person:

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has an accumulated VETSL debt or otherwise has a VETSL debt that has not been discharged, and

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leaves Australia (other than in circumstances specified in the rules) with the intention of remaining outside Australia for at least 183 days,

they must no later than 7 days after leaving Australia, give a notice to the Commissioner in the approved form.

Notice relating to absence from Australia

New subsection 23ED(2) deals with the circumstances in which a person who has a VETSL debt and has been outside of Australia for at least 183 days in any 12-month period is required to provide notice to the Commissioner. If a person who:

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has an accumulated VETSL debt or otherwise has a VETSL debt that has not yet been discharged, and

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has been outside Australia for at least 183 days (other than in circumstances specified in the rules) in any 12-month period, and

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was not required under subsection @15481(1) to give a notice to the Commissioner in connection with that absence from Australia,

they must, no later than 7 days after the end of those 183 days, give a notice to the Commissioner in the approved form.

Notice relating to income (including foreign-sourced income)

New subsection 23ED(3) deals with the circumstances in which a person who has a VETSL debt and is a foreign resident is required to provide notice to the Commissioner about their income. If a person who:

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is a foreign resident, and

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on 1 June immediately preceding an income year, had an accumulated VETSL debt

they must (other than in circumstances specified in the rules) give to the Commissioner, in the approved form, a notice relating to the person's income (including foreign-sourced income) for the income year. The notice must be given within the period specified in the form.

The Note under new subsection 23ED(3) clarifies that the Commissioner may defer the time for giving a notice, and refers to section 388-55 in Schedule 1 to the Taxation Administration Act 1953.

Content of notices under this section

New subsection 23ED(4) provides that the rules may provide for the content of notices under section 23ED.

Subdivision C - Assessments

Subdivision C deals with assessments made by the Commissioner in relation to accumulated VETSL debts, including the making of assessments, the notification of notices of assessment, the deferral of making assessments, and the amendment of assessments.

Section 23EE Commissioner may make assessments

New section 23EE provides that the Commissioner may make an assessment of:

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a person's accumulated VETSL debt on 1 June immediately before the making of the assessment, and

•

the amount required to be paid in respect of that debt under section 23EA or 23EC.

The Commissioner can make an assessment from any information in the Commissioner's possession.

This provision is modelled on section 154-35 of HESA.

Section 23EF Notification of notices of assessment of tax

New section 23EF provides that a notice of assessment under section 23EE may be served on a person by specifying the amounts in a notice of assessment in respect of the person's income of an income year under section 174 of the Income Tax Assessment Act 1936. This can occur if:

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the Commissioner is required to serve on a person a notice of assessment in respect of the person's income of an income year under section 174 of the Income Tax Assessment Act 1936, and

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the Commissioner has made, in respect of the person, an assessment under section 23EE of the VSL Act of the amounts referred to in that section], and

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notice of the assessment under that section has not been served on the person. New section 23EF is modelled on section 154-40 of HESA.

Section 23EG Commissioner may defer making assessments

New subsection 23EG(1) allows a person to apply to the Commissioner for deferral of the making of an assessment in respect of the person under section 23EE. An application for deferral must in the approved form.

New subsection 23EG(2) requires an application for deferral to specify:

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the income year for which the deferral is being sought; and

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the reasons for seeking the deferral.

New subsection 23EG(3) provides that the income year specified in the application must be:

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the income year in which the person makes the application, or

•

the immediately preceding income year, or

•

the immediately succeeding income year.

New subsection 23EG(4) provides that the Commissioner may, on application by a person under section 23EG, defer making an assessment in respect of the person under section 23EE. The Commissioner may defer making an assessment in respect of the person if the Commissioner is of the opinion that:

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payment of the assessed amount would cause serious hardship to the person if the assessment were made, or

•

there are other special reasons that make it fair and reasonable to defer making the assessment.

New subsection 23EG(5) provides the Commissioner may defer making the assessment for any period the Commissioner thinks appropriate.

New subsection 23EG(6) provides the Commissioner must, as soon as practicable after an application is made under section 23EG consider the matter to which the application relates, and notify the applicant of the Commissioner's decision on the application.

The Note following new subsection 23EG(6) clarifies that deferrals making assessments, or refusals of applications, are reviewable under Part 7 of the VSL Act (see the amendments in items 22 and 23).

New section 23EG is modelled on section 154-45 of HESA.

Section 23EH Commissioner may amend assessments

New subsection 23EH(1) allows a person to apply to the Commissioner for an amendment of an assessment made in respect of the person under section 23EE so that the amount payable under the assessment is reduced, or no amount is payable under the assessment. An application for an amendment of an assessment must be made in the approved form.

New subsection 23EH(2) requires that an application to the Commissioner to amend an assessment must be made within 2 years after the day on which the Commissioner gives notice of the assessment to the person, or must specify the reasons justifying a later application.

New subsection 23EH(3) allows the Commissioner, on application by a person under section 23EH, to make a decision to amend an assessment made in respect of the person under section 23EE so that the amount payable under the assessment is reduced, or no amount is payable under the assessment. The Commissioner may amend an assessment if the Commissioner is of the opinion that:

•

payment of the assessed amount has caused or could cause serious hardship to the person, or

•

there are other special reasons that make it fair and reasonable to make the amendment.

New subsection 23EH(4) provides the Commissioner must, as soon as practicable after an application is made under section 23EH consider the matter to which the application relates, and notify the applicant of the Commissioner's decision on the application.

The Note following subsection 23EH(4) clarifies that amendments of assessments, or refusals of applications, are reviewable under Part 7 of the VSL Act (see the amendments in items 22 and 23).

New section 23EH is modelled on section 154-50 of HESA.

Division 6 - Application of tax legislation

New Division 6 deals with the application of tax legislation to VETSL debts and the VSL Act.

Section 23FA Returns, assessments, collection and recovery

New subsection 23FA provides that the following tax legislation applies, so far as it is capable of applying, in relation to a compulsory VETSL repayment amount of a person as if it were income tax assessed to be payable by a taxpayer by an assessment made under Part IV of the Income Tax Assessment Act 1936:

•

Part IV of the Income Tax Assessment Act 1936

•

Division 5 of the Income Tax Assessment Act 1997

•

Part 4-15 in Schedule 1 to the Taxation Administration Act 1953.

The application of this tax legislation is subject to Divisions 4, 5 and 6 of the VSL Act.

This provision is modelled on section 154-60 of HESA.

Section 23FB Charges and civil penalties for failing to meet obligations

New subsection 23FB(1) provides that Part 4-25 in Schedule 1 to the Taxation Administration Act 1953 has effect as if:

•

any compulsory VETSL repayment amount of a person were income tax payable by the person in respect of the income year of which the assessment of that debt was made, and

•

paragraphs 17(1)(a) and 20(a), Part 3A and sections 97 and 107 of the VSL Act were income tax laws (within the meaning of the Income Tax Assessment Act 1997).

New subsection 23FB(2) provides that subsection 23FB(1) does not have the effect of making a person liable to a penalty for any act or omission that happened before the commencement of this subsection.

New section 23FB is modelled on section 154-65 of HESA.

Section 23FC Pay as you go (PAYG) withholding

New section 23FC provides that Part 2-5 (other than section 12-55 and Subdivisions 12-E, 12-F and 12-G) in Schedule 1 to the Taxation Administration Act 1953 applies, so far as is capable of application, in relation to the collection of amounts of a compulsory VETSL repayment amount of a person as if the compulsory VETSL repayment amount were income tax. This is modelled on section 154-70 of HESA.

Section 23FD Pay as you go (PAYG) instalments

New section 23FD provides that Division 45 in Schedule 1 to the Taxation Administration Act 1953 applies, so far as is capable of application, in relation to the collection of a compulsory VETSL repayment amount of a person as if the compulsory VETSL repayment amount were income tax. This is modelled on section 154-80 of HESA.

Section 23FE Failures to comply with section 23ED

New section 23FE provides that Part III of the Taxation Administration Act 1953 applies in relation to a failure to comply with section 23ED, as if section 23ED were a taxation law (within the meaning of section 2 of the Taxation Administration Act 1953). This is modelled on section 154-90 of HESA.

The effect of new section 23FE is that a failure to comply with new section 23ED, which deals with notices required to be provided to the Commissioner in specified circumstances, is an offence of absolute liability, subject in the first instance to a fine not exceeding 20 penalty units (see sections 8C and 8E of the Taxation Administration Act 1953). Where a person has been previously convicted of two or more relevant offences, the penalty is a fine not exceeding 50 penalty units or imprisonment of no longer than 12 months, or both. However, a person does not commit an offence if the person is not capable of complying with new section 23ED (see subsection 8C(1B) of the Taxation Administration Act 1953).

When an offence is one of absolute liability, it will be established if it can be proven that the person engaged in certain conduct, without having to prove the person's fault (that is, that the person intended this, or was reckless or negligent).

An offence of absolute liability is appropriate for a failure to comply with new section 23ED as it provides the necessary deterrence to support the effective administration of the tax system, particularly in the context of the self-assessment system, by ensuring people take some care to understand and comply with their taxation-related obligations.

More specifically, in this particular situation, failure to notify the Commissioner in a timely manner as required under new section 23ED would undermine the effectiveness of the framework and policy regarding the VET Student Loans program, once it is administratively separated from HELP. Therefore, new section 23FE would support the effectiveness of the enforcement regime relating to the administration of VET student loan debts. Importantly, a person would not be penalised under the criminal law if the person was simply incapable of complying with the requirements in new section 23ED.

The operation of section 23FE does not represent a substantive change from the existing arrangements for VET student loan debtors. As noted above, a similar provision is contained in HESA (see section 154-90) and currently applies to VET student loan debtors by virtue of VET student loan debts being HELP debts. New section 23FE maintains the same penalties that apply now but under separate arrangements for VET student loans given their separation from other forms of HELP debts. This ensures consistency with the treatment of other HELP debts.

Section 23FF Extent of Commissioner's general administration of this Act

New section 23FF provides that the Commissioner has the general administration of the VSL Act to the following extent:

•

paragraphs 17(1)(a) and 20(a) (loan applications to include tax file numbers)

•

Part 3A

•

Part 7, so far as it relates to reviewable decision for which the Commissioner is the decision maker

•

section 97 (Commissioner may disclose VET information)

•

section 107 (verifying tax file numbers).

The Note following new section 23FF clarifies that one effect of new section 23FF is that the VSL Act is to that extent a taxation law for the purposes of the Taxation Administration Act 1953.

Item 21 - Section 67 (note)

Section 67 deals with the application of Part 6 of the VSL Act.

This item amends the Note in section 67 by deleting the words "VET student loan debt is taken to be remitted to the extent to which the VET student loan debt relates to the loan amount concerned: see section 137-19 of the Higher Education Support Act 2003" and replacing them with "VETSL debt is taken to be remitted to the extent to which the debt relates to the loan amount concerned: see section 23BA. (For remission of debts incurred before 1 July 2019, see section 137-19 of the Higher Education Support Act 2003)".

This clarifies that, if a student's FEE-HELP balance is re-credited under Part 6 of the VSL Act, the student's VETSL debt is taken to be remitted to the extent to which the debt relates to the loan amount concerned, and refers to section 23BA.

Item 22 - Section 74 (after table item 1)

Section 74 sets out the reviewable decisions under the VSL Act and the decision maker for each of those decisions.

This item amends the table in section 74 to provide that:

•

a decision to defer, or refuse to defer, the making of an assessment under section 23EG is a reviewable decision, and the Commissioner is the decision maker; and

•

a decision to amend, or refuse to amend, an assessment under section 23EH is a reviewable decision, and the decision maker is the Commissioner by the Commissioner.

This amendment ensures that these decisions can be reconsidered under section 76 or 77 of the VSL Act and be subject to merits review by the Administrative Appeals Tribunal under section 80 of the VSL Act. These amendments do not create new review rights, rather they ensure that these decisions continue to be subject to merits review as they currently are under HESA.

Item 23 - Subsection 78(1) and (2)

Section 78 deals with the reconsideration of a reviewable decision by a delegate of the Secretary.

This item amends subsections 78(1) and (2) by adding the words "or Commissioner" after the words "the Secretary". The effect of this amendment is that subsections 78(1) and (2) deals with the reconsideration of a reviewable decision by a delegate of the Commissioner, as well as by a delegate of the Secretary.

Part 2 - Consequential and contingent amendments

Items 24 to 72 are consequential amendments to the following legislation:

•

A New Tax System (Family Assistance)(Administration) Act 1999

•

Bankruptcy Act 1966

•

Income Tax Assessment Act 1936

•

Income Tax Assessment Act 1997

•

Social Security Act 1991

•

Student Assistance Act 1973

•

Taxation Administration Act 1953

•

Taxation (Interest on Overpayments and Early Payments) Act 1983

•

Trade Support Loans Act 2014

•

VET Student Loans Act 2016

Some of the amendments are contingent on passage of the SLS Bill, which is before Parliament at the time of introduction of this Bill.

A New Tax System (Family Assistance)(Administration) Act 1999

Item 24 - Subsection 3(1) (at the end of paragraph (c) of the definition of income tax refund )

Subsection 3(1) of the A New Tax System (Family Assistance)(Administration) Act 1999 defines terms used in the Act.

This item amends the definition of income tax refund in subsection 3(1) by adding "(iv) section 23FA of the VET Student Loans Act 2016, or" at the end of paragraph (c) of the definition of income tax refund. The effect of this amendment is that an overpayment of an amount payable by the person by an assessment made under Part IV of the Income Tax Assessment Act 1936 because of section 23FA of the VSL Act, is an income tax refund amount which may be used by the Commissioner to offset family tax benefit debt.

Bankruptcy Act 1966

Item 25 - After paragraph 82(3AB)(a)

Subsection 82(3AB) of the Bankruptcy Act 1996 deals with debts incurred under certain Acts that are not provable in bankruptcy.

This item amends subsection 82(3AB) by inserting paragraph "(aaa) Part 3A of the VSL Act 2016 (VETSL debts);" after paragraph 82(3AB)(a). The effect of this amendment is that a debt incurred under Part 3A of the VSL Act is not provable in bankruptcy. This is consistent with the treatment of HELP debts incurred under HESA.

Higher Education Support Act 2003

Item 25A - At the end of subsection 137-19(4)

This item inserts a Note under subsection 137-19(4) of HESA.

As a result of amendments proposed to be made by item 9 of Schedule 1 to the Bill and as made by Schedule 3 to the SLS Act, subsection 137-19(4) of HESA will deal with the remission of VET student loan debts incurred before 1 July 2019 under HESA (pre-1 July 2019 VSL debts), providing that these debts are taken to be remitted if the person's HELP balance is re-credited under Part 6 of the VSL Act.

The new Note explains that a person's HELP balance may also be re-credited under section 128-25 of HESA, but that in those circumstances there is no related remission of debt under subsection 137-19(4). This is because section 128-25 of HESA deals with re-crediting amounts on discharge of a debt through repayment and a re-credit under section 128-25 does not result in the remission of the debt concerned, because those debts would have already been discharged through repayments.

Income Tax Assessment Act 1936

Item 26 - Subsection 82A(2) (after paragraph (bb) of the definition of expenses of self-education )

Section 82A of the Income Tax Assessment Act 1936 deals with deductions for expenses of self-education. Subsection 82A(2) defines certain terms used in section 82A, including a definition for expenses of self-education.

This item amends the definition for expenses of self-education in subsection 82A(2) by inserting paragraph "(bba) a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Part 3A of the VET Student Loans Act 2016; or" after paragraph 82A(2)(bb).

The effect of this amendment is that a payment made in respect of, or in respect of the reduction or discharge of, any indebtedness to the Commonwealth under Part 3A of the VSL Act is not an 'expense of self-education' (being expenses necessarily incurred by the taxpayer for or in connection with a prescribed course of education) for the purposes of section 82A. This is consistent with the treatment of payments in respect of HELP debts incurred under HESA.

Income Tax Assessment Act 1997

Item 27 - Section 12-5 (at the end of table item headed "education expenses")

Section 12-5 of the Income Tax Assessment Act 1997 sets out provisions that contain rules about specific types of deductions.

This item amends section 12-5 by adding "see also VET Student Loans" at the end of the table item headed 'education expenses'. The effect of this amendment is to provide a prompt for a reader to also refer to the table item headed 'VET Student Loans' (refer to Item 28).

Item 28 - Section 12-5 (after table item headed "uranium mining")

This item amends the table in section 12-5 Income Tax Assessment Act 1997 by specifying that, in relation to VET Student Loans:

•

there are rules about limits on deductions as set out in section 82A of the Income Tax Assessment Act 1936

•

there are rules about payments made to reduce a debt to the Commonwealth under Part 3A of the VSL Act (VETSL debts), with there being no deduction unless provided as fringe benefit, as set out in section 26-20 of the Income Tax Assessment Act 1997.

Item 29 - After paragraph 26-20(1)(cb)

Section 26-20 of the Income Tax Assessment Act 1997 provides that specified assistance to students cannot be deducted under the Act.

This item amends subsection 26-20(1) by adding paragraph "(cba) a payment made to reduce a debt to the Commonwealth under Part 3A of the VET Student Loans Act 2016; or" after paragraph 26-20(1)(cb). This amendment provides that a payment made to reduce a debt to the Commonwealth under Part 3A of the VSL Act cannot be deducted under the Income Tax Assessment Act 1997. This is consistent with the treatment of payments in respect of HELP debts.

Item 30 - After subparagraph 52-132(a)(xi)

Section 52-132 of the Income Tax Assessment Act 1997 describes what a supplementary amount of payment is under the ABSTUDY scheme. Generally, for the purposes of income tax treatment of a payment under the ABSTUDY scheme, a supplementary amount of payment may, in limited circumstances, be exempt from income tax.

This item amends paragraph 52-132(a) by adding subparagraph "(xia) discharging a compulsory VETSL repayment amount (within the meaning of the VET Student Loans Act 2016);" after subparagraph 52-132(a)(xi). This amendment provides that the supplementary amount of a payment is the total of (amongst other costs), so much of the payment as is included to assist, or reimburse, costs of discharging a compulsory VETSL repayment. This is consistent with the treatment of payments in respect of HELP debts.

Item 31 - After subparagraph 52-140(3)(a)(xa)

Section 52-140 of the Income Tax Assessment Act 1997 deals with the income tax treatment of a 'Commonwealth education or training payment', other than a payment to or on behalf of a student under the ABSTUDY scheme. Subsection 52-140(3) describes what a supplementary amount is for the purposes of section 54-140.

This item amends paragraph 52-140(3)(a) by adding subparagraph "(xb) discharging a compulsory VETSL repayment amount (within the meaning of the VET Student Loans Act 2016);" after subparagraph 52-140(3)(a)(xa). This is consistent with the treatment of compulsory repayments of HELP debts.

Item 32 - Subsection 995-1(1)

Section 995-1(1) of the Income Tax Assessment Act 1997 defines certain terms used in the Act. Terms used in Schedule 1 to the Taxation Administration Act 1953 must also be defined in section 995-1 of the Income Tax Assessment Act 1997.

This item amends subsection 995-1(1) by inserting a definition for accumulated VETSL debt, as this term is used in Schedule 1 to the Taxation Administration Act 1953. The definition is the same as the definition of that term as used in the VSL Act.

Social Security Act 1991

Item 33 - Section 19AA (definition of accumulated HELP debt )

Section 19AA of the Social Security Act 1991 contains student start-up loan definitions for the purposes of Chapter 2AA. This item repeals the definition of accumulated HELP debt. The definition is not needed because the concept of accumulated HELP debt will be removed from the Social Security Act 1991 through the amendments in this Bill, which replace the concept of accumulated HELP debt with a reference to debts incurred under HESA.

Item 34 - Section 1061ZVAA

Section 1061ZVAA of the Social Security Act 1991 provides a simplified outline of Chapter 2AA of that Act.

This item amends section 1061ZVAA by deleting the words "When the person's income reaches the minimum repayment income under the Higher Education Support Act 2003, and the person has finished repaying any debt under that Act, the person must start repaying student start-up loan debt." and replacing them with "Once the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes, the person must start repaying the debt in relation to student start-up loans".

This reflects and accounts for the legislative changes made by this Bill that, as of 1 July 2019, a person may incur a VETSL debt under the VSL Act (in addition to a HELP debt under HESA). The amendment clarifies that a debt incurred under HESA and certain other income-contingent loan schemes, (such as a VETSL debt under the VSL Act), must be repaid before the person must start repayment of a student start-up loan debt.

Item 35 - Section 1061ZVFA

Section 1061ZVFA of the Social Security Act 1991 provides a simplified outline of Part 2AA.4 of the Act.

This item amends section 1061ZVFA by deleting the words "The person is required to make repayments, of amounts based on his or her income, if that income is above a particular amount and if the person has repaid the person's accumulated HELP debts arising under the Higher Education Support Act 2003. The Commissioner makes assessments of repayment amounts, which are collected in the same way as amounts of income tax and accumulated HELP debts." and replacing them with "The person is required to make repayments once the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes. The amount of the repayments is based on the person's income. The Commissioner makes assessments of repayment amounts, which are collected in the same way as amounts of income tax."

This reflects and accounts for the legislative changes made by this Bill that, as of 1 July 2019, a person may incur a VETSL debt under the VSL Act (in addition to a HELP debt under HESA). The amendment clarifies that a person is required to make repayments of their student start-up loan debt once their income exceeds the minimum repayment income under HESA and once they have finished repaying a debt incurred under HESA and certain other income-contingent loan schemes (such as a VETSL debt under the VSL Act).

Items 36 to 38 - Subsection 1061ZVHA(1)

Subsection 1061ZVHA(1) of the Social Security Act 1991 deals with a person's liability to repay amounts of a student start-up loan debt and provides that a person is liable to pay to the Commonwealth, in accordance with Division 3, so much of the person's repayable student start-up loan debt for the income year that does not exceed an amount worked out in accordance with a specified formula.

Item 36 amends subsection 1061ZVHA(1) by repealing and replacing the formula according to which the amount of the person's repayable SSL debt is worked out for the income year. The new formula is:

The new formula reflects and accounts for the legislative changes made by this Bill that, as of 1 July 2019, a person may incur a VETSL debt under the VSL Act (in addition to a HELP debt under HESA). Accordingly, the amount of a person's repayable SSL debt is an amount that does not exceed an amount worked out by subtracting a person's relevant income-contingent loans liability (rather than HELP liability) from the applicable percentage of their HELP repayment income.

Item 37 repeals the definition of HELP liability in subsection 1061ZVHA(1). This amendment is consequential to the amendment in item 36.

Item 38 amends subsection 1061ZVHA(1) by adding a definition of relevant income-contingent loans liability at the end of subsection 1061ZVHA(1). This amendment is consequential to the amendment in item 36.

This amendment provides that relevant income-contingent loans liability for the purposes of section 1061ZVHA is the sum of any amounts the person is liable to pay in respect of the income year under:

•

section 154-1 or 154-16 of HESA, and

•

section 23EA or 23EC of the VSL Act.

Items 36 to 38 of Schedule 1 commence on 1 July 2019. However, these provisions do not commence at all if Schedule 2 to the SL Act commences on that day. This is because subsection 1061ZVHA(1) is also proposed to be amended by Schedule 2 to the SLS Act. Therefore, items 36 to 38 will not commence if the amendments in Schedule 2 to the SLS Act commence. In that case, item 39 will commence.

Item 39 - Subsection 1061ZVHA(1) (after paragraph (a) of the definition of relevant income-contingent loans liability )

Item 39 amends subsection 1061ZVHA(1) by inserting paragraph "(aa) the sum of any amounts the person is liable to pay under section 23EA or 23EC of the VET Student Loans Act 2016 in respect of the income year;" after paragraph 1061ZVHA(1)(a).

Item 39 of Schedule 1 commences immediately after the start of 1 July 2019. However, the provision does not commence at all if Schedule 2 to the SLS Act does not commence on that day. This is because item 39 is an alternative to items 36 to 38, and amends a provision in the Social Security Act 1991 as amended by Schedule 2 to the SLS Act.

Item 40 - Subsection 1061ZZFD(1) definition of relevant income-contingent loans liability )

This item repeals and replaces the definition of relevant income-contingent loans liability in subsection 1061ZZFD(1) of the Social Security Act 1991.

Student Assistance Act 1973

Item 41 - Subsection 3(1) (definition of accumulated HELP debt )

Subsection 3(1) of the Student Assistance Act 1973 defines certain terms used in that Act. This item amends subsection 3(1) by repealing the redundant definition of accumulated HELP debt. The definition is not needed because the concept of accumulated HELP debt will be removed from the Student Assistance Act 1973 through the amendments in this Bill, which replace the concept of accumulated HELP debt with a reference to debts incurred under HESA

Item 42 - Section 6A

Section 6A of the Student Assistance Act 1973 provides a simplified outline of Part 2 of the Act.

This item amends section 6A by deleting the words "When the person's income reaches the minimum repayment income under the Higher Education Support Act 2003, and the person has finished repaying any debt under that Act, or under the Social Security Act 1991 in relation to a student start-up loan under Chapter 2AA of that Act, the person must start repaying ABSTUDY student start-up loan debt." and replacing them with "Once the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes, the person must start repaying debt in relation to ABSTUDY student start-up loans."

This amendment clarifies that a person must finish repaying a HELP debt under HESA and certain other income-contingent loan schemes (such as a VETSL debt under the VSL Act and SSL debts under the Social Security Act 1991), before the person must start repaying a debt in relation to an ABSTUDY student start-up loan.

Item 43 - Section 10A

Section 10A of the Student Assistance Act 1973 provides a simplified outline of Division 5 of the Act.

This item amends section 10A by deleting the words "The person is required to make repayments, of amounts based on his or her income, if that income is above a particular amount and if the person has repaid the person's accumulated HELP debts arising under the Higher Education Support Act 2003 and accumulated SSL debts arising under Chapter 2AA of the Social Security Act 1991. The Commissioner makes assessments of repayment amounts, which are collected in the same way as amounts of income tax and those other income-contingent loan debts." and replacing them with "The person is required to make repayments once the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes. The amount of the repayments is based on the person's income. The Commissioner makes assessments of repayment amounts, which are collected in the same way as amounts of income tax."

The amendment clarifies that a person is required to make repayments of their ABSTUDY student start-up loan debt once the person's income exceeds the minimum repayment income under HESA and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes (such as a VETSL debt under the VSL Act and SSL debts under the Social Security Act 1991).

Items 44 and 45 - Subsection 10F(1) (definition of relevant income-contingent loans liability )

Subsection 10F(1) deals with a person's liability to pay to the Commonwealth their repayable ABSTUDY SSL debt.

Item 44 amends paragraph (a) of the definition of relevant income-contingent loans liability by inserting "or 154-16" after "154-1". The effect of this amendment is to add a reference to section 154-16 of HESA in paragraph (a) of the definition and ensure consistency in the treatment of the overseas debtor levy across income- contingent loan schemes.

Item 44 commences on 1 July 2019. However, the provision does not commence at all if Schedule 2 to the SLS Act commences on that day. This is because section 10F(1) of the Student Assistance Act 1973 is also proposed to be amended by Schedule 2 to the SLS Act and the effect of that amendment is also to correct the references to HESA provisions in subsection 10F(1). Therefore, the amendment in item 44 is only necessary if Schedule 2 to the SLS Act does not commence.

Item 45 amends subsection 10F(1) by adding subparagraph "(aa) the sum of any amounts the person is liable to pay under section 23EA or 23EC of the VET Student Loans Act 2016 in respect of the income year;".

Schedule 2 to the SLS Act also amends subsection 10F(1) of the Student Assistance Act 1973, but item 45 operates irrespective of whether the amendment in the SLS Act commences.

If Schedule 2 to the SLS Act commences, item 45 amends subsection 10F(1) as amended by that Act. If Schedule 2 to the SLS Act does not commence, item 45 operates together with item 44 to amend subsection 10F(1).

The effect of these amendments is that 'relevant income-contingent loans liability' for the purposes of section 10F is the sum of any amounts the person is liable to pay in respect of the income year under:

•

section 154-1 or 154-16 of HESA,

•

section 23EA or 23EC of the VSL Act, and

•

section 1061ZVHA of the Social Security Act 1991.

This ensures that a person starts repaying an accumulated ABSTUDY SSL debt after the person has finished repaying any HELP debts under HESA, VETSL debts under the VSL Act and SSL debts under the Social Security Act 1991.

Item 46 - Subsection 12ZLC(1) (definition of relevant income-contingent loans liability )

Section 12ZLC of the Student Assistance Act 1973 describes the amount a person is liable to pay under section 12ZK of that Act. Section 12ZK deals with compulsory repayments in respect of accumulated FS debt.

This item amends subsection 12ZLC(1) by repealing and replacing the definition of relevant income-contingent loans liability. Under the new definition, a relevant income-contingent loans liability means the sum of:

•

any amounts the person is liable to pay under section 154-1 or 154-6 of HESA in respect of the income year, and

•

any amounts the person is liable to pay under section 23EA or 23EC of the VSL Act in respect of the income year.

Taxation Administration Act 1953

Item 47 - Section 8AAZA

Section 8AAZA of the Taxation Administration Act 1953 defines certain terms used in Part IIB of the Act.

This item amends section 8AAZA by inserting a definition for compulsory VETSL repayment amount. The definition is the same as the definition of that term as used in the VSL Act.

This amendment is consequential to the amendment in item 48.

Item 48 - After paragraph 8AAZLD(aa)

Section 8AAZLD of the Taxation Administration Act 1953 deals with special priority credits that may arise under Schedule 1 and how they must be applied by the Commissioner.

This item amends section 8AAZLD by inserting paragraph "(aaa) then against any compulsory VETSL repayment amount of the entity; and" after paragraph 8AAZLD(aa).

This amendment provides that if the Commissioner is to apply a credit that arises under Schedule 1, the Commissioner must apply it to compulsory VETSL repayment amounts of the entity, in the order specified in section 8AAZLD.

Item 49 - After paragraph 11-1(ca) in Schedule 1

Schedule 1 of the Taxation Administration Act 1953 concerns the collection and recovery of income tax and other liabilities and section 11-1 of Schedule 1 specifies the object of Part 2-5 'Pay as you go (PAYG) withholding'.

This item amends section 11-1 by inserting new subparagraph 11-1(caa) to include liabilities to the Commonwealth under Part 3A of the VSL Act.

This amendment provides that the object of Part 2-5 is to ensure the efficient collection of liabilities to the Commonwealth under Part 3A of the VSL Act (in addition to income tax, Medicare levy and other liabilities arising under other Acts).

Item 50 - Subsection 15-25(1) in Schedule 1

Section 15-25 of Schedule 1 of the Taxation Administration Act 1953 provides, for the purpose of collecting income tax and other liabilities referred to in certain paragraphs of section 11-1 of the Act, the Commissioner may make withholding schedules specifying how to work out amounts to be paid.

This item amends subsection15-25(1) to insert reference to paragraph 11-1(caa). This is a consequential amendment to item 49 of this Schedule.

Item 51 - After paragraph 15-30(ca) in Schedule 1

Section 15-30 of Schedule 1 of the Taxation Administration Act 1953 concerns matters to be considered by the Commissioner when making withholding schedules.

This item amends section 15-30 by inserting paragraph 15-30(caa) which requires the Commissioner, when making a withholding schedule, to also consider "the percentage referred to in the definition of applicable percentage of repayment income in subsection 23EA(1) (about repayments of accumulated VETSL debts) of the VET Student Loans Act 2016 for any financial year starting on or after 1 July 2019".

This reflects the legislative changes made by this Bill that as of 1 July 2019 a VETSL debt can be incurred under the VSL Act and a percentage referred to in the definition of applicable percentage of repayment income in subsection 23EA(1) needs to be considered by the Commissioner when making a withholding schedule.

Item 52 - Paragraph 15-30(cb) in Schedule 1

This item amends paragraph 15-30(cb) in Schedule 1 of the Taxation Administration Act 1953 by omitting the word 'HELP'.

The effect of this amendment is to update a cross-reference to subsection 1061ZVHA(1) of the Social Security Act 1991 as a result of amendments in Schedule 2 to the SLS Act. Specifically, paragraph 15-30(cb) cross-references to the definition of applicable percentage of HELP repayment income in subsection 1061ZVHA(1) of the Social Security Act 1991. Schedule 2 to the SLS Act replaces that term with the term applicable percentage of repayment income. Item 52 updates the cross-reference to the defined term, and its commencement is contingent on the commencement of Schedule 2 to the SLS Act.

Therefore, the Note explains that item 52 does not commence if Schedule 2 to the SLS Act does not commence.

Item 53 - Paragraph 15-50(1)(b) in Schedule 1

Paragraph 15-50(1)(b) in Schedule 1 of the Taxation Administration Act 1953 lists certain paragraphs in section 11-1 of Schedule 1 that the Commissioner must take into account in working out withholding amounts.

This item amends paragraph 15-50(1)(b) by inserting reference to paragraph 11-1(caa). This is a consequential amendment to item 49 of this Schedule.

Item 54 - After paragraph 45-5(1)(ca) in Schedule 1

Division 45 of Schedule 1 of the Taxation Administration Act 1953 concerns the payment of instalments towards income tax liabilities and section 45-1 provides that the objective of Part 2-10 (which incorporates Division 45) - pay as you go instalments - is to ensure the efficient collection of income tax, Medicare levy and amounts of liabilities due under certain listed Commonwealth legislation.

This item amends subsection 45-5(1) of Schedule 1 by inserting paragraph 45-5(1)(caa). The effect of this is to include (in the list of Commonwealth legislation) reference to amounts of liabilities to the Commonwealth under Part 3A of the VSL Act. In effect this requires the Commissioner to consider amounts of liabilities to the Commonwealth under Part 3A of the VSL Act when making a withholding schedule.

Items 55 and 56 - Section 45-340 in Schedule 1 (method statement)

Section 45-340 of Schedule 1 of the Taxation Administration Act 1953 provides for how to work out adjusted tax on adjusted taxable income, or on adjusted withholding income for a base year.

Item 55 amends the method statement in section 45-340 of Schedule 1 by inserting Step 3AAA, after Step 3. New step 3AAA concerns accumulated VETSL debt and requires accumulated VETSL debts to be considered when working out adjusted tax on adjusted taxable income, or on adjusted withholding income for a base year.

Step 4 of the method statement provides that the result of adding together steps 1, 2, 3, 3AA, 3AB, 3AC and 3A is a person's adjusted tax on their adjusted taxable income or adjusted withholding income. Item 56 amends step 4 by adding a reference to new step 3AAA.

Items 57 and 58 - Section 45-375 in Schedule 1 (method statement)

Section 45-375 of Schedule 1 of the Taxation Administration Act 1953 provides for how to work out adjusted assessed tax on adjusted assessed taxable income.

Item 57 amends the method statement in section 45-375 of Schedule 1 by inserting Step 3AAA, after Step 3. New step 3AAA concerns accumulated VETSL debt. The effect of this amendment is to require a person's accumulated VETSL debt to be included in the calculation of a person's adjusted assessed tax on their adjusted assessed taxable income for the variation year.

Step 4 of the method statement provides that the result of adding together steps 1, 2, 3, 3AA, 3AB, 3AC and 3A is a person's adjusted assessed tax on their adjusted assessed taxable income for the variation year. Item 58 amends step 4 by adding in reference to new step 3AAA.

Item 59 - Subsection 250-10(2) in Schedule 1 (after table item 36A)

Subsection 250-10(2) of Schedule 1 of the Taxation Administration Act 1953 contains a table that lists tax related liabilities under certain Commonwealth legislation.

Item 59 adds a new item 36AA to that list, being:

Item 60 - Subsection 355-65(2) in Schedule 1 (at the end of the cell at table item 5, column headed "The record is made for or the disclosure is to..."

Section 355-65 in Schedule 1 provides an exception to the offence in section 355-25 relating to the disclosure of protected information by taxation officers, so that disclosure is permitted for other government purposes if the disclosure is covered by an item in the table subsection 355-25(2).

The effect of the amendment in item 60 is to provide for disclosures to the Secretary of the Department administered by the Minister administering the VSL Act.

Taxation (Interest on Overpayments and Early Payments) Act 1983

Item 61 - Subsection 3(1)

Section 3 of the Taxation (Interest on Overpayments and Early Payments) Act 1983defines certain terms for the purposes of the Act.

This item amends section 3 to insert a definition for compulsory VETSL repayment amount - which has the same meaning as in the VSL Act. This new definition is required because the term is used in other provisions of the Act, as amended by this Bill (see items 62 to 67 below).

Item 62 - Section 3C (after table item 45)

Section 3C of the Taxation (Interest on Overpayments and Early Payments) Act 1983 contains a table that lists a range of provisions of various Commonwealth legislation that together comprise the meaning of relevant tax for the purposes of the Act.

This item amends section 3C by inserting a new table item 45A to add amounts that are treated under Division 6 of Part 3A of the VSL Act as if they were income tax. This is consistent with the treatment of amounts that are treated as income tax under HESA.

Items 63 and 64 - Section 8A

Section 8A of the Taxation (Interest on Overpayments and Early Payments) Act 1983 concerns the entitlement to interest under the Act where certain payments are made in advance. These include compulsory repayment amounts for debts under HESA, the Social Security Act 1991, the Student Assistance Act 1973 and the Trade Support Loans Act 2014.

These items amend subsections 8A(1) and (2) to add references to compulsory VETSL repayment amounts (new subparagraph 8A(1)(a)(iiaa) and new subparagraph 8A(2)(baa)).

Items 65 and 66 - Section 8E

Section 8E of the Taxation (Interest on Overpayments and Early Payments) Act 1983 concerns the entitlement to interest under the Act payable by the Commissioner when crediting, applying or refunding amounts in excess of any compulsory repayment amounts for debts under HESA, the Student Assistance Act 1973 and the Trade Support Loans Act 2014.

These items amend subsections 8E(1) and (2) to add references to compulsory VETSL repayment amounts (new subparagraph 8E(1)(a)(iiaa) and new subparagraph 8E(2)(d)(iii)).

Item 67 - After paragraph 12A(1A)(b)

Section 12A of the Taxation (Interest on Overpayments and Early Payments) Act 1983 concerns the entitlement to interest under the Act where the Commissioner remits or refunds certain amounts - including listed amounts under subsection 12A(1A).

This item amends subsection 12A(1) to add compulsory VETSL repayment amounts to the list (new paragraph 12A(1A)(baa)). This is consistent with the treatment of compulsory repayments amounts under HESA.

Trade Support Loans Act 2014

Item 68 - Section 5 (definition of accumulated HELP debt )

Section 5 of the Trade Support Loans Act 2014 contains definitions for defined terms used in the Act.

This item amends section 5 by repealing the redundant definition of accumulated HELP debt. The definition is not needed because the concept of accumulated HELP debt will be removed from the Trade Support Loans Act 2014 through the amendments in this Bill, which replace the concept of accumulated HELP debt with a reference to debts incurred under HESA.

Items 69 and 70 - Section 39

Section 39 of the Trade Support Loans Act 2014 is a simplified outline of Part 3.2 of the Act (discharging debts).

Item 69 amends section 39 be deleting the words "Trade support loan that is paid to a person must be repaid. Compulsory repayments start once the person's income reaches the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying an accumulated HELP debt under that Act and any debts under certain other income-contingent loan schemes" and inserting "Trade support loan that is paid to a person must be repaid. Once the person's income exceeds the minimum repayment income under the Higher Education Support Act 2003 and the person has finished repaying any debt under that Act and certain other income-contingent loan schemes, the person must start repaying debt in relation to trade support loan."

Item 70 amends the last paragraph of section 39 to delete the words "and compulsory repayments of accumulated HELP debts". As a result of the deletion, the last paragraph reads "The Commissioner makes assessments of compulsory repayments, which are collected in the same way as amounts of income tax."

These amendments clarify that trade support loans must be repaid once the person's income exceeds the minimum repayment income specified in HESA and the person has finished repaying certain other income-contingent loan debts (including HELP debts under HESA, VETSL debts under the VSL Act, SSL debts under the Social Security Act 1991 and ABSTUDY SSL debts under the Student Assistance Act 1973).

Item 71 - Subsection 46(1) (after paragraph (a) of the definition of relevant income-contingent loans liability )

Subsection 46(1) of the Trade Support Loans Act 2014 contains a formula for working out a person's liability to repay amounts of trade support loan (TSL) debt. A person with an accumulated TSL debt, whose income for an income year exceeds the minimum repayment income for the income year, is liable to pay so much of their repayable TSL debt for the income year that does not exceed the amount worked out by the formula, which is as follows:

Sub-section 46(1) defines relevant income-contingent loans liability for the purposes of the formula.

This item amends that definition to add in the sum of any amounts the person concerned is liable to pay under section 23EA or 23EC of the VSL Act in respect of the income year (new paragraph (aa) of the definition).

The definition of relevant income-contingent loans liability ensures that a person starts repaying an accumulated TSL debt after the person has finished repaying any HELP debts under HESA, VETSL debts under the VSL Act, SSL debts under the Social Security Act 1991 and ABSTUDY SSL debts under the Student Assistance Act 1973.

VET Student Loans Act 2016

Item 72 - Subsection 23BA(4)

Subsection 23BA(4) of the VSL Act deals with the remission of VETSL debts and provides that a person's VETSL debt, in relation to a loan amount used to pay tuition fees for the person for a course, is taken to be remitted if the person's FEE-HELP balance is re-credited under Part 6 of the VSL Act in relation to the loan amount.

This item amends subsection 23BA(4) by deleting "FEE-HELP" and replacing it with "HELP". This is because the SLS Act, once it commences, will amend the nomenclature of "FEE-HELP balance" to "HELP balance" throughout HESA.

Item 76 - At the end of Part 6

This item inserts a new Division 4 at the end of Part 6 of the VSL Act. New Division 4 deals with re-crediting by the Secretary on discharge of VETSL debts and comprises new section 73A.

New section 73A provides that the Secretary must re-credit a person's HELP balance with the amount of any compulsory and voluntary repayments of the person's VETSL debt that the person paid in the preceding financial year, as notified to the Secretary by the Commissioner of Taxation after the end of that financial year. The first time this will occur is in 2020, with a person's HELP balance re-credited shortly after the end of the 2019-20 financial year with the amounts of the person's repayments in that year. New section 73A operates in a similar way to new section 128-25 of HESA, inserted in HESA by the SLS Act.

This ensures that, following the separation of VET student loan debts from other forms of HELP debts, a person's HELP balance is re-credited if a person makes payments in discharge of a VETSL debt owed under new Part 3A of the VSL Act, consistent with the arrangements for other HELP debts under new section 128-25 of HESA.

As explained in the Note under new subsection 73A(2), a re-credit under new section 73A does not have the same effect as a re-credit under Division 2 or 3 of Part 6 of the VSL Act. That is, a re-credit under section 73A does not result in the remission of the debt concerned, because those debts would have already been discharged through repayments.

Items 71A, 71B, 71C, 71D, 73, 74 and 75

These items are consequential to the insertion of new Division 4 and section 73A into Part 6 of the VSL Act.

Item 71A amends paragraph 22(1)(b) of the VSL Act. This ensures that a provider is not required to repay the Commonwealth amounts that are re-credited under new section 73A.

Item 71B deletes Note 1 under subsection 22(1). This Note is redundant as a result of the changes to paragraph 22(1)(b). Item 71C renames Note 2 as a result of the deletion of Note 1. Item 71D amends the remaining Note (noting this is also amended by item 19 of Schedule 1 to the Bill and Schedule 3 to the SLS Act). As amended, the Note explains the effect of re-credits under Division 2 or 3 of Part 6 of the VSL Act referring the reader to new section 23BA for debts incurred on or after 1 July 2019 and to section 137-19 of HESA for debts incurred before 1 July 2019.

Item 73 ensures that subsection 23BA(4) does not operate in relation to amounts re-credited under new section 73A of Part 6 of the VSL Act. This is because those debts would have already been discharged through repayments.

Item 74 amends the Note under section 67 of the VSL Act as proposed to be amended by item 21 of Schedule 1 to the Bill. As amended, the Note under section 67 explains the effect of amounts re-credited under Division 2 or 3 of Part 6 of the VSL Act.

Item 75 amends the heading of Division 3 of Part 6 of the VSL Act to reflect that Division 3 deals with re-credits other than on discharge of debt (which is dealt with by new Division 4 of Part 6).

Schedule 2 - Courses and loan caps determination

VET Student Loans Act 2016

Item 1 - At the end of section 16

Under subsection 16(1) of the VSL Act, the Minister may, by legislative instrument, determine courses of study for which VET student loans may be approved and maximum loan amounts, or methods for working out maximum loan amounts, for those courses. The instrument is known as the courses and loans caps determination (Determination) (currently the VET Student Loans (Courses and Loan Caps) Determination 2016).

This item adds a new subsection 16(4) which provides that, despite subsection 14(2) of the Legislation Act 2003, the Determination may make provision in relation to a matter by applying, adopting or incorporating, with or without modification, any matter contained in an instrument or other writing as in force or existing from time to time.

Currently, once the Determination is made, VET student loans can only be approved for courses specified in the Determination. Courses are specified by reference to their course code, and the Determination is updated twice yearly.

If a course becomes superseded or reaccredited, VET student loans cannot be approved for the new course until the next update to the Determination. This can be some months away depending on when the replacement courses are released.

The purpose of this amendment is to lay the groundwork for the Determination to be amended, to refer to listed courses and new courses that replace those that become superseded or reaccredited, as specified on the National Register.

The National Register (as defined in section 3 of the National Vocational Education and Training Regulator Act 2011) is a register that contains the most up to date information about VET courses and their status. The National Register is publicly available and free at www.training.gov.au .

Referring to the National Register in the Determination will ensure the instrument reflects the dynamic nature of the VET system and retains its currency in relation to courses that are superseded and reaccredited.

This change means students can be approved for VET student loans for courses that supersede those on the Determination or when a course is reaccredited without having to wait for the Determination to be updated.