House of Representatives

Explanatory Memorandum

Circulated By Authority of the Minister for Tertiary Education, Skills, Jobs and Workplace Relations

Schedule 3 - Voluntary repayment bonus

Summary

Schedule 3 would reduce the voluntary repayment bonus for HELP debts from 10 per cent to five per cent.

Background

Higher education students can make a voluntary repayment towards their HELP debt to the Australian Taxation Office at any time. Voluntary repayments of $500 or more currently attract a 10 per cent bonus on the payment amount. This means a student's account will be credited with an additional 10 per cent of their payment amount. This reduces the student's debt to the Commonwealth.

The Government announced in the 2011-12 Budget that it would reduce the 10 per cent HELP voluntary repayment bonus, for payments of $500 or more, to 5 per cent from 1 January 2012.

The HELP debts are:

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HECS-HELP (see Part 3-2 of HESA)

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FEE-HELP (see part 3-3 of HESA)

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OS-HELP (see part 3-4 of HESA)

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VET FEE-HELP (see Part 2 of Schedule 1A of HESA).

For the purpose of voluntary repayments, a payment is not taken to have been made until it is received by the Commissioner of Taxation or a person acting on behalf of the Commissioner.

Detailed explanation

Higher Education Support Act 2003

Item 1 - Subsection 140-5(1) (example)

Section 140-5 of HESA explains how a person's former accumulated HELP debt is calculated. Subsection 140-5(1) sets out a method statement and an example. Item 1 would repeal the example and replace it with a new example with updated date references and which takes into account the reduction in the voluntary repayment bonus for HELP debts from 10 per cent to five per cent.

Item 2 - Section 148-1 (first paragraph)

Section 148-1 of HESA explains what Part 4-2 of HESA is about (discharge of indebtedness). Item 2 would amend the first paragraph of the explanation by replacing the reference to a 10 per cent repayment bonus with a reference to a 5 per repayment bonus.

Item 3 - Subsections 151-5(2) and (3)

Section 151-5 of HESA explains the effect of a person making voluntary repayments towards his or her HELP debt.

Subsection 151-5(2) explains (including through the use of an example) how much a person needs to pay in order to pay off the total amount of his or her debt - with the current 10 per cent repayment bonus taken into account.

Subsection 151-5(3) explains (including through the use of an example) the effect of making a partial repayment of the debt - with the current 10 per cent repayment bonus taken into account.

Item 3 would amend subsections 151-5(2) and (3) (including the examples) consequent upon the reduction of the 10 per cent repayment bonus to 5 per cent.

Item 4 - Application provision

Item 4 provides that the amendments to be made by Schedule 3 will only apply to voluntary payments made under Division 151 of HESA on or after the commencement of Schedule 3. Clause 2 provides that Schedule 3 will commence on the later of 1 January 2012 and the day on which this Bill (if passed by Parliament) receives Royal Assent. In other words, voluntary payments to reduce a person's HELP debt made on or after this commencement date will only attract a 5 per cent voluntary repayment bonus.