Bills Digest no. 15 2014–15

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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

This Bills Digest is a revised version of sections of Bills Digest 29, 2013–14, which was prepared for a previous Bill introduced in November 2013, which included earlier versions of the Schedules in this Bill.[1]

Carol Ey and Michael Klapdor
Social Policy Section
19 August 2014 

Contents

The Bills Digest at a glance
Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions
Concluding comments

 

Date introduced:  17 July2014
House:  House of Representatives
Portfolio:  Social Services

Commencement:  Schedule 1 commences on 1 January 2015. Schedule 2 commences immediately after Schedule 1, however the commencement of items 115 and 116 will depend on whether item 115 of Schedule 1 of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014 is enacted.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website at http://www.comlaw.gov.au/.

 

The Bills Digest at a glance

Purpose of the Bill

• The Bill amends the Social Security Act 1991 (the SS Act)[2] and other Acts to:

–      allow for interest charges to be applied to certain debts incurred by recipients of student assistance payments (Schedule 1) and

–      create a new income contingent loan (the student start-up loan) to replace the current student start-up scholarships (Schedule 2).

Background

• Both measures were originally included in the Social Services and Other Legislation Amendment Bill 2013, but were removed prior to that Bill being passed.
• The introduction of increased interest charges on student support payment debts was initially announced in the 2012–13 Mid-Year Economic and Fiscal Outlook.
• Student Support Loans were initially proposed in the 2013–14 Budget.

Interest charges

• The Bill proposes the introduction of interest charges on certain debts relating to student assistance payments, where the debtor does not have, or is not honouring, an acceptable repayment arrangement.
• Interest will be charged at the 90-day Bank Accepted Bill rate plus seven per cent.
• At present interest is not charged on other forms of social security debt, even when no acceptable repayment arrangement is in place.
• It is unclear why students are being particularly targeted in relation to social security debt. For example, no evidence has been provided as to whether students have particularly high levels of debt where there is no repayment arrangement in place, or have high default rates.

Student start-up loans

• Higher education students in receipt of certain student assistance payments will be eligible to apply for twice-yearly loans of $1,025 to assist with the costs of study.
• These loans are to be repaid on the same basis as loans under the Higher Education Loan Programme.
• The existing student start-up scholarships, which are automatically provided to recipients of these student assistance payments, will be abolished.
• The introduction of student start-up loans will bring the number of student income-contingent loan types to seven, with policy responsibility spread across three different government departments and a further three agencies involved in administration.
• The replacement of a cash entitlement with an additional income-contingent loan has raised concerns about deterring students from disadvantaged backgrounds from undertaking higher education study
  

Purpose of the Bill

The purpose of the Social Services and Other Legislation Amendment Bill 2014 (the Bill) is to amend the Social Security Act 1991 (the SS Act)[3] and other Acts to:

• allow for interest charges to be applied to certain debts incurred by recipients of student assistance payments and
• create a new income contingent loan (the student start-up loan) to replace the current student start-up scholarships.

Structure of the Bill

The Bill contains two schedules:

• Schedule 1 provides for interest charges to certain student assistance debts and
• Schedule 2 creates student start-up loans.

Background

Interest charges

Schedule 1 proposes to introduce an interest charge for certain debts relating to student assistance payments from 1 January 2015. The relevant payments are Youth Allowance (for students and apprentices), Austudy, ABSTUDY living allowance and Fares Allowance. This measure was initially announced in the 2012–13 Mid-Year Economic and Fiscal Outlook (MYEFO).[4] The charge will apply to social security debts where the debtor does not have or is not honouring an acceptable repayment arrangement. The new interest charge will be based upon the 90-day Bank Accepted Bill rate plus an additional seven per cent that currently applies to tax debts. The Explanatory Memorandum states that this rate has averaged 10.9 per cent over the last four years and currently stands at 9.7 per cent.[5]

The Government’s purpose in introducing a new interest charge is to ‘encourage debtors to repay their debt, in a timely fashion, where they have the financial capacity to do so’.[6] The Statement of Compatibility with Human Rights for the Bill states that the ‘current lack of an interest charge on student income support debt means recipients have no incentive to repay their debts’.[7]

How do social security debts arise?

Social security debts arise when payments are made to a person who is not entitled, or when overpayments are made to an entitled recipient. In many cases this occurs where an individual has failed to declare income or assets that would have been taken into account by the means test, and would have resulted in a lower payment rate. This can often occur by mistake or in situations where income has been earned, but not received in a particular period of time, and the person has not declared the income until they have received it. Serious cases, where a person has provided misleading information in order to be eligible for a payment or has not declared large amounts of income, can result in prosecution for social security fraud. In most situations, overpayments are recovered by a reduction in future payments to the person. When a person who has raised a debt is no longer in receipt of a social security payment they are usually required to enter into a repayment plan.

The Department of Human Services took action to raise more than two million Centrelink debts in 2012–13, to the value of $1.8 billion. Approximately $1.2 billion in Centrelink debt was recovered in 2012–13.[8]

Existing provisions allow for interest charges to be applied to social security debts

Provision for the application of a penalty interest charge to social security debts already exists in the SS Act and the Student Assistance Act 1973. The existing provisions are similar to the proposed amendments, in that interest is only applied in situations where a person is no longer receiving a social security payment and has not entered into an agreement to pay the debt, or is not honouring that agreement. The Secretary has broad discretion to make a determination not to apply interest charges to a particular debt or for a particular period. The SS Act provides for an interest rate of 20 per cent per year, however, this can, and has been reduced by a Ministerial determination.[9] The Social Security (Penalty Interest) Determination 2001 has set the penalty interest rate at three per cent per year.[10]

It appears an administrative decision has been made at some point not to apply interest or administrative charges to any social security debts.[11] The Explanatory Memorandum does not provide an explanation as to why the existing penalty interest provisions are not currently being applied, nor why these provisions cannot be amended to the same effect as the Schedule’s proposals. The only reference to the existing penalty interest provisions is a comment that these existing provisions will not apply to those covered by the proposed new arrangements.

Recipients of student assistance payments are being targeted for savings

The Explanatory Memorandum also does not explain why it is only student assistance payments that are to be subject to the new interest charge, rather than all social security payment debts. The Statement of Compatibility with Human Rights argues that the ‘differential treatment is for a reasonable and objective purpose’ because:

Recipients of these payments generally transition from study to employment (and thus are no longer recipients of social security payments) before the full amount of the debt is repaid through the social security withholding mechanism. Once the person has left payments, many often choose not to repay the debt, and indeed there is currently little incentive for them to do so.^[12]

This argument does not account for other social security payment recipients who transition off income support and into paid work, particularly Newstart Allowance and Youth Allowance (Other) recipients. The argument for treating recipients of student payments differently on the basis that they move off payment and into employment is weakened by the fact that there are other categories of payment recipients who also move off payment and into employment in large numbers. If the reasoning behind the measure is that those in employment can and should be encouraged to repay their debts in a timely fashion through application of an interest charge, then it is hard to see why it is not applied to all social security debtors exiting payment and entering paid work. This would avoid discriminating against a particular group.

A possible reason for the targeting of the student assistance group is that they may leave income support with significantly more debt than others, or that they are less likely to repay that debt over time without some incentive (and are less likely to come into contact with the social security system again). Another possible reason may be that former students are considered more likely than other social security debtors to be able to repay their debt. There is no recent published data on how much debt students leaving income support have raised. Data from 2011–12 indicated that 62,283 debts had been raised against recipients of Youth Allowance (Student), ABSTUDY and Austudy worth more than $94.1 million, an average debt of $1,511.^[13] This compares to 182,133 debts raised by Newstart Allowance recipients worth $196.3 million, at an average of $1,078.^[14] So the average debt level is higher for student payments, but it is unclear how many of these debts are cleared through the payment recovery system, or how many of those who leave income support have a repayment plan in place.

It would appear that this group is being targeted because it is considered likely that a large number of debts can be recovered that would otherwise have gone unpaid. The proposed provisions allow for other payments to be made subject to the new interest charge if prescribed by a legislative instrument. The scope of the new charge may be gradually widened to include a range of social security payments.

Student start-up loans

The proposal to convert student start-up scholarships into income-contingent loans was part of a package of measures announced by the Gillard Government in April 2013, and then incorporated in the 2013-14 Budget.^[15] The savings from these measures were to contribute to the funding of school education reforms.

Student start-up scholarships were introduced in 2010 as part of the implementation of the Bradley Review recommendations.^[16] They are automatically provided to eligible recipients of Youth Allowance, Austudy and ABSTUDY Living Allowance, while undertaking an approved higher education course, and are intended to assist with the costs of study, including purchasing text books, computer equipment and the like. Payment is made through two half-yearly instalments of $1,025 each (a total of $2,050 per year).^[17] As at 31 August 2012, 180,872 students had received two payments for 2012, and a further 56,580 had received one.^[18]

This Bill proposes the creation of two new loans:

• the student start-up loan (SSL) and
• the ABSTUDY SSL.

These loans will replace the student start-up scholarships for recipients of Youth Allowance, Austudy and ABSTUDY from 1 January 2015. Whereas the current scholarships are paid automatically to eligible student payment recipients, recipients will need to apply separately to the Department of Human Services for the new loans. It is expected that some students will choose not to take up the loans, in order not to incur the debt.^[19] In the 2013–14 Budget proposal, students currently receiving student assistance payments were to be ‘grandfathered’, that is, they would continue to receive the scholarships while they continued to receive student assistance, rather than having to apply for a loan. However, the current Bill removes student start-up scholarships for all students.

The arrangements for the SSL and ABSTUDY SSL essentially replicate those currently applying to Higher Education Contribution Scheme (HECS) loans under the Higher Education Loan Programme (HELP). That is, there are no administrative charges, the loans are indexed at the HELP indexation rate (currently the Consumer Price Index (CPI)), and repayment is through the taxation system. No repayment is required where taxable income is below a threshold level (currently $53,345 for the 2014-15 tax year) and then a sliding scale of rates applies up to a maximum of eight per cent of income for those with taxable income above $99,070 in 2014-15.^[20] In the 2014–15 Budget, changes to HELP were announced, including increasing the indexation rate of the loan debt to the ten year Government Bond rate up to a maximum of six per cent, and a reduction in the threshold income level for repayment, however legislation to implement these changes has not yet been introduced.[21]

There is some concern that moving a grant payment to a loan (albeit one with repayment contingent on sufficiently high income) may deter some students from undertaking study, or, by not taking up the loan, suffer unnecessary hardship. The student start-up scholarships are only available to students who are receiving means-tested income support payments, and hence are more likely to be those from disadvantaged backgrounds. For example, 23.9 per cent of those who received a student start-up scholarship in 2012 were from regional and remote areas,^[22] compared with only 21.3 per cent of all domestic undergraduate students.^[23]

However, when questioned at a Senate Estimates hearing on this issue, a departmental witness stated ‘we have now had income contingent loans in place in higher education since 1989 and during that period they have not suppressed participation; they in fact have done the reverse. So we would not necessarily expect this income contingent loan to have a different impact.’^[24]

Relationship with other student loans

Introduction of SSLs will bring to the number of income-contingent student loans to seven. Five of these are part of the HELP arrangements, administered by the Department of Education, where the loan amounts are paid to providers, generally to cover tuition fees.[25]

The other income-contingent loan arrangement is the recently introduced Trade Support Loans (TSLs). These loans provide up to $20,000 over four years to apprentices studying in designated trades. The loans are paid directly to the apprentice, and are intended to cover tuition fees, equipment costs and living expenses. Like the SSLs, the TSLs replaced a cash benefit, albeit providing a higher level of support than was previously available (the former Tools For Your Trade program only provided up to $5,500 over four years). TSLs are administered by Australian Apprenticeship Centres, under the auspices of the Department of Industry.^[26]

While the repayment income thresholds for TSLs are linked to the HELP levels, the indexation rate of the loan debts is tied to the CPI, rather than to the HELP indexation rate. While these are currently the same, as noted above, the 2014–15 Budget proposed increasing the HELP rate (which also applies to SSLs) to the ten year Government Bond rate. This means that the indexation of loan debts to apprentices for living expenses will potentially be considerably lower that the indexation of the equivalent loans provided to higher education students.

All these loans are repaid through the tax system. None are provable in bankruptcy, but all are extinguished at death.

For those students with more than one type of loan (and it is expected that most students with an SSL will also have a HELP debt), the repayment is processed in a specified order. HELP debt is repaid first, then the SSL debt, and finally the TSL debt.

Committee consideration

Senate Community Affairs Legislation Committee

A previous version of Schedule 1 was referred to the Senate Community Affairs Legislation Committee for inquiry and report by 12 December 2013. Details of the inquiry are on the Inquiry homepage.

The majority view was that the interest charge was appropriate.[27] However, the Labor Senators considered that the measure was ‘overly punitive on students who are already under significant financial strain’, and that the measure would not achieve the desired outcomes.[28]

Similarly, the Greens noted that the recipients of these payments were from disadvantaged backgrounds and are likely to be under significant financial pressure, and that threatening these groups with financial penalties was ‘socially irresponsible’. They also noted that the Department of Social Services had estimated that only half the debtors would begin to repay their debt when threatened with the penalty. The Greens therefore did not support passing this Schedule.[29]

Senate Education and Employment Legislation Committee

An earlier version of Schedule 2 was referred to the Senate Education and Employment Legislation Committee for inquiry and report by 12 December 2013. Details of the inquiry are at the Inquiry homepage.

The Committee accepted that student indebtedness was an issue, but did not consider there was any evidence to suggest that higher education enrolments would be adversely affected by the introduction of SSLs. It also noted that this measure was originally introduced in the 2013–14 Budget.[30]

The Labor Senators argued that the inclusion of this measure in the 2013–14 Budget was to fund the changes to school funding arrangements, which had subsequently been abandoned. They noted the evidence presented to the Committee by groups representing students, who argued that increasing the cost of higher education reduced participation, particularly among those from low socio-economic status (SES) backgrounds. On this basis they opposed the amendment to the Schedule.[31]

The Greens Senators likewise considered the evidence presented by student and staff representatives on the disproportionate impact of this measure on those from financially disadvantaged backgrounds. They also noted the Department of Social Services had provided evidence that the financial impact may be reduced due to increasing numbers of students being unable to repay their HELP debts. On the basis of these concerns they did not support the Schedule.[32]

Senate Standing Committee for the Scrutiny of Bills

The earlier Bill was considered by the Committee. The Committee raised concerns with some of the proposed provisions in Schedule 1 of the current Bill, particularly the use of legislative instruments to allow any other social security payments to be made subject to the proposed interest charge. The Committee’s Alert Digest stated:

The committee expects that important matters will usually be provided for in primary legislation. Therefore, although the power does give flexibility to the Minister to extend the requirement to pay interest, it is not clear why this flexibility is needed and appropriate given that the sort of matters to which it should apply appears to involve a significant question of policy.^[33]

The Committee sought advice from the Minister as to why the proposed approach is considered appropriate.^[34]

Parliamentary Joint Committee on Human Rights

The Committee considered the earlier Bill and determined that the Schedule concerning the introduction of interest charges did not give rise to any human rights compatibility issues.[35] The Committee sought further information on the SSLs in relation to the right to social security, but had no further comment following consideration of the Department’s response.[36]

Policy position of non-government parties/independents

As noted above, both Labor and the Greens opposed both these measures when they were previously introduced. The views of the Palmer United Party (PUP) and the independent Senators on this particular Bill are not known, although Clive Palmer has previously stated that his party’s policy is to abolish fees to ‘remove the debt burden of getting a decent tertiary education’, suggesting that the PUP Senators would not support the introduction of SSLs. [37] On the other hand, the Liberal Democratic Party higher education policy is for students to fully fund their tuition.[38]

Position of major interest groups

The National Tertiary Education Union opposes both measures on the grounds that they impact adversely on disadvantaged students. It notes that students from lower socio-economic backgrounds, and in particular females, are debt averse and hence the introduction of the SSL will potentially deter some students from participating in higher education.[39]

In its submission to the Senate Education and Employment Legislation Committee inquiry, the National Union of Students provided comprehensive analysis to suggest that those from regional areas, disadvantaged backgrounds and mature age students were more likely to be deterred from higher education study by increased levels of debt. They also presented evidence that the annual study costs incurred by low SES full-time students were higher than for average full-time students.[40]

Financial implications

It is estimated that the introduction of the interest charge will result in savings of $49.7 million over four years.[41]

For the SSLs, the Explanatory Memorandum identifies savings of $2.0 billion over five years.[42] This reflects savings to outlays through the removal of the cash payments to eligible students. However, there are hidden costs associated with moving these costs to loan arrangements.

The outstanding loan amounts that will replace the outlays are shown as assets in the Government’s financial statements, but the stated asset value does not reflect its true value. The Government estimates that by 2017–18, 23 per cent of new HELP debt is not expected to be repaid.[43] Given that debtors will not begin to repay the new SSL debt until after they have paid off their HELP debt, the default rates for these new loans would be expected to be even higher.

At present, the SSL debt (and HELP debt) is indexed in line with the CPI, which is lower than the notional cost of government borrowing—the bond rate. The estimated average time for repayment of HELP debt is currently 8.6 years and expected to rise to 9.8 years for new debt in 2017–18.^[44] Therefore, the SSL debt will not begin to be repaid for an average of around nine years and is expected to take about two years to be repaid.^[45] At present, the CPI is 3.0 per cent per annum, while Government ten year bonds have generally had an interest rate around 4.0 per cent.^[46] If these rates continued over a ten year period, the result is a difference in the loan repayment amount of over 10 per cent, which effectively represents lost government revenue.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.[47] The Government considers that the Bill is compatible.

Key issues and provisions

Schedule 1

As discussed above, the key issues relating to this amendment include the lack of a clear explanation for the need for this new interest charge when provisions exist for interest to be applied to social security debts, the lack of an explanation as to why these existing interest provisions are not currently being applied, and the failure to clearly explain why it is only debts relating to student assistance payments that are being made subject to the interest charge.

Another issue of concern is that, unlike the existing interest provisions, the proposed new interest charge can be applied in cases where a person is still in receipt of a social security payment. The proposed provisions do allow the Minister to make a determination prescribing the circumstances in which a person may be granted an exemption from the interest charge and the Explanatory Memorandum states that it is envisaged these circumstances will include where a person is still in receipt of income support and debts can be withheld from their payment.^[48] However, it is unclear why provisions exempting those still in receipt of income support are not included in the statute (as is the case with the existing interest provisions), particularly when debts can be recovered via payment reductions.

The existing provisions for interest payments provide broad discretion to the Secretary to determine whether or not to apply interest to a particular debt or for a particular period. This allows the Department of Human Services to take account of an individual’s particular situation and the impact interest charges will have. It is unclear whether the Secretary will be given similar discretion via the proposed legislative instrument.

Amendments to the Social Security Act 1991

Item 6 inserts proposed sections 1229D, 1229E, 1229F, 1229G and 1229H into the SS Act, setting out the new interest charge provisions.[49]

Proposed section 1229D provides for debts outstanding on the following payments to be subject to the new interest charge provisions at proposed sections 1229E and 1229F:

• Youth Allowance (for students and apprentices)
• Austudy
• fares allowance and
• a social security payment prescribed in an instrument.

Proposed subsections 1229D(2) and 1229D(3) allow the Minister to prescribe a social security payment or the other form of Youth Allowance payable to jobseekers (known as Youth Allowance (Other)) as being subject to the interest charge provisions.

Proposed section 1229E provides for an interest charge to be applied to such debts where a notice has been given under existing section 1229(1) of the SS Act, an amount owing has not being paid by the due day and no payment arrangement (as provided for by section 1234 as amended by item 7) is in place.

Proposed subsections 1229E(2) and 1229E(3) provide for the Minister to prescribe circumstances, via a legislative instrument, in which the interest charge provisions do not apply. In situations where a person has not been penalised with an interest charge, proposed subsection 1229E(4) allows the Secretary to issue a notice at a later date for the outstanding debt to be paid within 28 days of the date of issue or a payment plan put in place, before the interest charge is applied.

Proposed subsection 1229E(6) sets out that the period for the calculation of the interest charge starts the day after the due day and ends either the last day that either the debt or the interest charge on the debt remains unpaid, or the day before the first payment is made on the debt under a repayment plan. Proposed subsection 1229E(7) sets out that the interest charge amount for a day in this period is the interest charge rate (set out at proposed section 1229(H)) multiplied by the sum of the unpaid debt and any interest charged on previous days. That is, the interest charge is applied to the sum of the debt and any accumulated interest amounts.

Proposed section 1229F sets out circumstances in which an interest charge is payable for periods in which a person is not honouring a payment plan in relation to an outstanding debt amount. In situations where a relevant debt repayment plan has been terminated, the individual has 14 days to pay any outstanding amount, and any previously accumulated interest charges on that outstanding amount, before an interest charge is applied by way of penalty.

Proposed section 1229H sets out that the interest charge rate is the sum of the base interest rate and seven percentage points. The base interest rate is the monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank of Australia for the month occurring two-months before the quarter in which the day falls.^[50] So, for example, for a day falling between 1 January and 31 March, the base interest charge is the monthly average yield of 90-day Bank Accepted Bills for the preceding November, and for a day between 1 April and 30 June the relevant month is the preceding February.

Amendments to the Student Assistance Act 1973

Similar amendments are proposed by items 8–12 to the Student Assistance Act 1973 to apply an interest charge on debts raised by a recipient of ABSTUDY.^[51]

Schedule 2

The provisions of Schedule 2 primarily reproduce those concerning HELP loans, which are contained in Chapter 4 of the Higher Education Support Act 2003 (HESA).[52] Relevant provisions are replicated in the SS Act for recipients of Youth Allowance and Austudy, and the Student Assistance Act 1973 for recipients of ABSTUDY.[53] Other changes to tax law relating to the repayment arrangements for the loans are also included.

Item 1 adds SSL debts and ABSTUDY SSL debts to the Bankruptcy Act 1966 in the same section as HELP loans. This means that these debts are not provable in bankruptcy, that is, they are not discharged in the event of a debtor being declared bankrupt.[54]

Items 2 to 10 insert new definitions in the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 to add the SSL and ABSTUDY SSL arrangements in the same manner as already provided for HELP loans.[55] Items 11 to 18 insert equivalent definitions into the SS Act.

Items 19, 23, 25, 28 and 30 repeal provisions relating to student start-up scholarships, which will be abolished on commencement of the Act.

Items 20 and 21 make minor amendments to ensure certain definitions apply for the whole Act, not just Part 2.

Item 22 inserts a new Chapter 2AA—Student start-up loans in the SS Act. Proposed Part 2AA.2—Qualification for and amount of student start-up loan defines eligibility criteria for the loans. Proposed Part 2AA.3—Indebtedness, Part 2AA.4—Discharge of indebtedness and Part 2AA.5—Tax administration matters replicate the relevant provisions from the HESA relating to HELP loans, with the exception of proposed sub-section 1061ZVHA (2) which provides that repayment of SSL loans will only occur once accumulated HELP debt has been repaid.

Items 24 and 26 provide for the indexation of the SSL loan amounts, which mirror those currently applying to student start-up scholarships. Item 27 provides that no indexation will occur before 1 January 2017.

Where a recipient has received a loan and it is then determined that the person was not eligible for the loan at some time after they qualified for it, and before the ‘enrolment test date’ (generally 35 days after the commencement of the course), item 32 provides that the loan amount will become a social security debt.

Items 34 and 35 provide that other social security debts cannot be repaid from the SSL amount. This is to ensure the SSL amount is available to cover study costs.

Items 36 to 57 propose consequential amendments to the Social Security (Administration) Act 1999 (the SS Admin Act).[56] These include arrangements concerning the payments of the loans and provisions for the review of decisions. Items 53 to 57 concern review of decisions, primarily by the Commissioner of Taxation, including inserting proposed Division 2A—Internal review of Commissioner decisions relating to student start-up loans into Part 4 of the SS Admin Act covering internal review processes.

Items 58 to 94 propose equivalent changes to the Student Assistance Act 1973 for ABSTUDY SSL loans. Item 67 proposes the insertion of new Part 2—ABSTUDY student start up loans, which includes the same provisions as the proposed Chapter 2AA in the SS Act, but in relation to ABSTUDY rather than Youth Allowance and Austudy. Item 93 inserts proposed Division 1A—Internal review of Commissioner decisions relating to ABSTUDY student start-up loans into Part 9 of the Student Assistance Act 1973 covering internal review processes by the Commissioner of Taxation.

Items 95 to 121 add ABSTUDY SSL and SSL repayments to the provisions in the Tax Administration Act 1953 and the Taxation (Interest on Overpayments and Early Payments) Act 1983 that address HELP repayments.[57] Items 115 and 116 are the same amendment, but 115 applies if the item 115 of the Minerals Resource Rent Tax Repeal and Other Measures Bill 2014 has not commenced as that item removes subsections from section 3C of Taxation (Interest on Overpayments and Early Payments) Act.[58]

Items 122 to 124 insert references to the SSLs into the Trade Support Loans Act 2014.[59]

Items 125 and 126 provide saving provisions in relation to the existing scholarship arrangements.

Concluding comments

It is unclear why specific interest charges are being introduced for student assistance debt and not on other social security debt. It is also unclear why new provisions are required to impose this interest, when the SS Act already contains provisions to allow the charging of interest on social security debt.

Converting a cash entitlement into an income contingent loan has raised concerns about the deterrence effect on potential higher education students from disadvantaged backgrounds. The introduction of additional form of loan administered by another agency also has the potential to increase confusion among applicants about the conditions of such loans and the repayment arrangements. Increasing the level of debt for many students will also extend the average period of repayment and hence the level of unpaid debt.

 

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