House of Representatives

Explanatory Memorandum

Circulated by authority of the Minister for Education the Honourable Julia Gillard MP

Schedule 1 - HECS-HELP Benefit

Higher Education Support Act 2003

Item 1 - After paragraph 140-1(2)(d)

Section 140-1 is an information provision which provides an outline of Division 140 which deals with how accumulated HELP debts are worked out for any given financial year. Subsection (2) provides that Stage 1 of the process of working out a person's accumulated HELP debt is to work out a person's former accumulated HELP debt for the preceding financial year by taking account of a range of specified matters. Item 1 amends subsection (2) to add proposed new paragraph (e) which has the effect of providing that if compulsory repayment amounts are not required to be paid in respect of a person's debt, the HECS-HELP benefit must be taken into account. A proposed new step in the method statement at subsection 140-5 (see item 2 ) sets out how the HECS-HELP benefit is to be taken into account.

Items 2- Subsection 140-5(1) (method statement, after step 4)

Section 140-5 deals with the method of working out a person's former accumulated HELP debt for a financial year, by way of multiplying a HELP debt indexation factor (defined under Schedule 1 as having the meaning given in section 140-10 of the Act) by an amount worked out using a method statement which is set out under section 140-5.

Item 2 inserts a proposed new step 4A with the effect that in the process of working out a person's former accumulated HELP debt, in the period (referred to in Step 3 of the method statement) subtract the amount of HECS-HELP benefit, if any, which has been determined in respect of the person by the Commissioner of Taxation for an income year, if the person did not have any compulsory repayment amounts for that year. The HECS-HELP benefit guidelines will specify the circumstances in which a person may receive the HECS-HELP benefit when the person does not have a compulsory repayment amount.

Item 3- subsection 140-5(1) (example after step 4)

The example set out at the end of the method statement at subsection 140-5(1) provides a hypothetical working out of a person's former accumulated HELP debt using the method statement. Item 3 inserts a new example after step 4 with the effect of indicating how proposed new step 4A (see item 2 ) might apply to the hypothetical scenario.

Item 4 - At the end of section 140-5(1)

Adds proposed new subsection (3) which has the effect of providing that if a determination by the Commissioner of a person's HECS-HELP benefit is reviewed:

•

the reference in Step 4A of the method statement in subsection (1) to the determination includes a reference to the decision on review; and

•

to the extent that the decision on review affects any Step in the Method statement, the decision on review must be taken into account in working out a person's former accumulated HELP debt.

The review of the decision would include revising a person's accumulated HELP debt for any prior year.

Item 5 - section 148-1 (second paragraph)

Chapter 4 deals with repayment of loans. Part 4-2 of Chapter 4 deals with discharge of indebtedness or how a person discharges a HELP debt, either by voluntary or compulsory repayments. Section 148-1 is an information provision which explains what Part 4-2 is about. Item 5 repeals the second paragraph of section 148-1, and substitutes 2 paragraphs with the effect of explaining that, where a person is required to make compulsory repayments based on whether that person's income is above a particular amount, that the person's repayment amounts may be reduced by the HECS-HELP benefit if the person is eligible and applies for it. The paragraphs also make clear that the Commissioner of Taxation determines eligibility for and the amount of a person's HECS-HELP benefit.

Item 6 - At the end of Division 148

Item 6 inserts proposed new section 148-5. This is an information provision which notes that the HECS-HELP benefit is also dealt with in the HECS-HELP Benefit Guidelines, made by the Minister under section 238-10 (and which are a legislative instrument), and that the provisions of Part 4-2 indicate when a particular matter is or may be dealt with in these Guidelines.

Item 7 - Subsection 154-1(1)

Section 154-1 deals with whether or not a person is liable to repay amounts in reduction of his or her repayable HELP debt. Item 7 is an amendment to subsection 154-1(1) which is required as a consequence of proposed new section 154-3 (see item 8 ).

Item 8 - After section 154-1

Item 8 adds proposed new section 154-3 with the effect of providing that if the Commissioner of Taxation has determined in respect of a person an amount of HECS-HELP benefit for an income year, the amount that the person is liable to pay under section 154-1 in reduction of the person's debt is reduced by the amount of the benefit. The first note to assist readers clarifies that the calculation of the person's compulsory repayment amount remains unaffected by the reduction of liability by the HECS-HELP benefit. The benefit applies as a reduction of the liability arising under section 154-1. The effect is that the amount calculated as the person's compulsory repayment amount is used to reduce the person's HELP debt even though the person is liable to pay and is required to pay less than the compulsory repayment amount as a result of receiving the HECS-HELP benefit. The second note to assist readers clarifies that if a determination by the Commissioner of a person's HECS-HELP benefit is reviewed, a reference to the determination includes a reference to the decision on review.

Item 9 - At the end of section 154-35

Section 154-35 deals with the power of the Commissioner of Taxation to make assessments of a person's accumulated HELP debt and the amount required to be paid in respect of that debt. Item 9 inserts a note at the end of the section to assist readers to clarify that the amount that the person actually pays will be less than the amount otherwise required to be paid in respect of the debt if the person receives the HECS-HELP benefit.

Items 10 and 11 - section 154-40

Section 154-40 deals with notification by the Commissioner of Taxation of notices of assessment of tax. Items 10 and 11 amend the section to make the existing section subsection (1) and add a proposed new subsection (2) to provide that if the Commissioner has determined an amount of HECS-HELP benefit in respect of a person for the income year, that the notice of assessment for that year may also refer to the benefit (as well as the person's income for that year, the amount of accumulated HELP debt and the amount to be repaid). A note at the end of proposed new subsection (2) to assist readers clarifies that if a determination by the Commissioner of a person's HECS-HELP benefit is reviewed, a reference to the determination includes a reference to the decision on review.

Item 12 - at the end of Subdivision 154-D

Subdivision 145-D deals with the application of tax legislation to compulsory repayments. Item 12 adds proposed new section 154-85, which provides that for the purposes of Subdivision 154-D that, where the Commissioner of Taxation has determined a HECS-HELP benefit in respect of a person for an income year, that person's compulsory repayment amount in respect of that year is to be reduced by the amount of HECS-HELP benefit. A note at the end of proposed new subsection 154-85 (2) to assist readers clarifies that if a determination by the Commissioner of a person's HECS-HELP benefit is reviewed, a reference to the determination includes a reference to the decision on review.

Item 13 - At the end of Part 4-2

Item 13 is a substantive amendment which inserts proposed new Division 157 which provides for the HECS-HELP benefit.

Proposed new Subdivision 157-A deals with who is eligible for the HECS-HELP benefit.

Proposed new section 157-1 provides that a person may apply to the Commissioner of Taxation for the HECS-HELP benefit in respect of an income year if the HECS-HELP Benefit Guidelines set out eligibility requirements for the HECS-HELP benefit and the person satisfies those requirements.

Proposed new section 157-5 provides that an application to the Commissioner of Taxation for the HECS-HELP benefit must be in a form and contain all information required by the HECS-HELP Benefit Guidelines.

Proposed new section 157-10 provides that an application must be in the manner and within the time specified in the HECS-HELP Benefit Guidelines.

Proposed new subdivision 157-B deals with the amount of the HECS-HELP benefit.

Proposed new section 157-15 provides that the amount of the HECS-HELP benefit for an income year is the amount specified in or worked out in accordance with the HECS-HELP Benefit Guidelines and that, if an amount is required to be paid under section 154-1, the amount of the HECS-HELP benefit must not be more than the amount required to be paid (i.e. the compulsory repayment amount for that year).

Proposed new subdivision 157-C deals with determination of applications for HECS-HELP benefit.

Proposed new section 157-20(1 ) provides that if a person applies for the HECS-HELP benefit for an income year, that the Commissioner of Taxation must determine whether the person is eligible for the benefit for that income year and, if eligible, the amount of the benefit worked out in accordance with the HECS-HELP Benefit Guidelines.

Proposed new subsection 157-20 (2 ) provides assistance to readers to clarify that the determination is not a legislative instrument within the meaning of section 5 of the Legislative Instruments Act 2003 . This subsection clarifies that the determination is not an additional exemption under section 7 of the Legislative Instruments Act 2003 which declares which instruments are not legislative instruments.

Proposed new section 157-25 provides that the Commissioner must notify the applicant in writing of his or her determination, and that this notice must be given within the time specified in the HECS-HELP Benefit Guidelines. A note to assist readers clarifies that this notification may also be given to a person by referring to the amount of HECS-HELP benefit in the person's notice of assessment.

Proposed new subsection 157-30 provides that if a determination by the commissioner of Taxation under proposed new section 157-20 is reviewed, a reference Part 4-2 (other than in the proposed new Division 157) to the determination includes a reference to the decision on review.

Item 14 - Section 206-1 (after table item 4)

Part 5-7 set out that some decisions made under the Act are subject to reconsideration and then review by the Administrative appeals Tribunal. The table at section 206-1 sets out the decisions which are reviewable under this Act and the decision maker for those decisions. Item 14 inserts at new item 4A of the table for determinations of HECS-HELP benefit eligibility and amounts under proposed new section 157-20, and that the decision maker is the Commissioner of Taxation.

Item 15 - Subsection 238-10(1) (after table item 4)

Section 238-10 provides that the Minister may by legislative instrument make specified Guidelines on matters either: required or permitted by a specified Chapter, Part or section of the Act; or necessary or convenient to be provided in order to carry our or give effect to that Chapter Part or section. Item 15 inserts a new item 4A in the table at subsection 238-10(1) to provide that the Minister may make HECS-HELP Benefit Guidelines on matters specified in Part 4-2.

Item 16 - Clause 1 of Schedule 1

Inserts a new definition of HECS - HELP benefit in the Dictionary at clause 1 of Schedule 1, to mean a benefit for an income year that:

•

If a compulsory repayment amount is required to be paid, has the effect of reducing the amount actually payable for that year, and

•

If a compulsory repayment amount is not required to be paid, reduces a person's accumulated HELP debt for that year.

The HECS-HELP Benefit Guidelines will provide for the circumstances in which an eligible person may receive each form of benefit.

Item 17 - Application

Item 17 is an application provision which provides that the amendments made by Schedule 1 apply in respect of the 2008-2009 and later income years.