Education and Other Legislation Amendment (VET Student Loan Debt Separation) Act 2018 (116 of 2018)

Schedule 1   Separation of VET student loan debts from HELP debts

Part 1   Main amendments

VET Student Loans Act 2016

20   After Part 3

Insert:

Part 3A - VETSL debts

Division 1 - Simplified outline of this Part

23AA Simplified outline of this Part

Loans that the Secretary approves and uses to pay tuition fees for a person are repayable under this Part.

A person incurs a debt (called a VETSL debt) each time a loan amount is used to pay tuition fees for the person. Each of those debts is then incorporated into a single debt called the person's accumulated VETSL debt.

An accumulated VETSL debt can be repaid in 2 ways:

(a) by making voluntary repayments; or

(b) by making compulsory repayments (based on the person's income) through the income tax system.

Division 2 - VETSL debts

23BA VETSL debt

(1) A person incurs a debt to the Commonwealth if the Secretary:

(a) approves a VET student loan for the person; and

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

The debt is a VETSL debt .

(2) The amount of the VETSL debt is:

(a) 120% of the loan amount; or

(b) if the rules specify a lesser percentage of the loan amount for the person - that lesser percentage of the loan amount.

Note: For specification by class, see subsection 13(3) of the Legislation Act 2003.

(3) A VETSL debt is incurred on the day that the Secretary pays the loan amount.

(4) 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 in relation to the loan amount.

23BB VETSL debt discharged by death

Upon the death of a person who owes a VETSL debt to the Commonwealth, the debt is taken to have been paid.

Note: VETSL debts are not provable in bankruptcy: see subsection 82(3AB) of the Bankruptcy Act 1966.

23BC Notice to Commissioner

(1) 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.

(2) The Secretary may include in the notice any other details the Commissioner requests for the purpose of ensuring the Commissioner has the information needed to exercise powers or perform functions of the Commissioner under or in relation to this Act.

Division 3 - Accumulated VETSL debts

23CA Simplified outline of this Division

There are 2 stages to working out a person's accumulated VETSL debt for a financial year.

In stage 1, the person's former accumulated VETSL debt is worked out. This is done by adjusting the preceding financial year's accumulated VETSL debt to take account of:

(a) changes in the Consumer Price Index; and

(b) the VETSL debts the person incurs during the last 6 months of the preceding financial year; and

(c) voluntary repayments of the debt; and

(d) compulsory VETSL repayment amounts in respect of the debt.

In stage 2, the person's accumulated VETSL debt is worked out from:

(a) the person's former accumulated VETSL debt; and

(b) the VETSL debts the person incurs during the first 6 months of the financial year; and

(c) voluntary repayments of those debts.

Note: Incurring that financial year's accumulated VETSL debt discharges the previous accumulated VETSL debt and VETSL debts: see section 23CE.

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

(1) 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:

(a) the amount worked out using the following method statement; by

(b) the HELP debt indexation factor (within the meaning of the Higher Education Support Act 2003) for 1 June in that financial year.

Method statement

Step 1. Take the person's accumulated VETSL debt for the immediately preceding financial year. (This amount is taken to be zero if the person has no accumulated VETSL debt for that financial year.)

Step 2.Add the sum of all of the VETSL debts (if any) that the person incurred during the last 6 months of the immediately preceding financial year. If the total is a number of whole dollars and a number of cents, the total is taken to be the number of whole dollars. If the total is an amount of less than one dollar, the total is taken to be zero.

Step 3. Subtract 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 period:

(a) starting on 1 June in the immediately preceding financial year; and

(b) ending immediately before the next 1 June.

Step 4.Subtract 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.

Step 5. Subtract 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.

Step 6. Add 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.

Example: Lorraine is studying part-time for a Diploma of Early Childhood Education and Care. On 1 June 2020, Lorraine had an accumulated VETSL debt of $15,000. She incurred a VETSL debt of $1,500 on 31 March 2020. She made a voluntary repayment of $525 on 1 May 2021. Lorraine lodged her 2019-20 income tax return and a compulsory VETSL repayment amount of $3,000 was assessed and notified on her income tax notice of assessment on 3 September 2020.

To work out Lorraine's former accumulated VETSL debt before indexation on 1 June 2021:

Step 1: Take the previous accumulated VETSL debt of $15,000 on 1 June 2020.

Step 2: Add the VETSL debt of $1,500 incurred on 31 March 2020.

Step 3: Subtract the $525 voluntary repayment made on 1 May 2021.

Step 4: Subtract the $3,000 compulsory repayment assessed on 3 September 2020.

Step 5: Does not apply because since 1 June 2020 Lorraine had no amendments to any assessment.

Step 6: Does not apply because since 1 June 2020 Lorraine had no amendments to any assessment.

Lorraine's former accumulated VETSL debt before indexation on 1 June 2021 is:

Lorraine's former accumulated VETSL debt before indexation

If, for example, the indexation factor for 1 June 2021 were 1.030, then the former accumulated VETSL debt would be:

Former accumulated VETSL debt formula

(2) For the purposes of this section, 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.

23CC Stage 2 - working out an accumulated VETSL debt

(1) A person's accumulated VETSL debt , for a financial year, is worked out as follows:

Accumulated VETSL debt formula

where:

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

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.

VETSL debts incurred means the sum of the amounts of all of the VETSL debts (if any) that the person incurred during the first 6 months of the financial year, with the total rounded down to the nearest whole dollar (and a total of less than one dollar taken to be zero).

Example: Paula is studying part-time for a Diploma of Nursing. On 1 June 2021, her former accumulated VETSL debt was worked out using section 23CB to be $20,000. She incurred a VETSL debt of $1,500 on 31 August 2020. No repayments have been made in the 12 months from 1 June 2020.

Paula's accumulated VETSL debt on 1 June 2021 is worked out by taking her former accumulated VETSL debt of $20,000 and adding the $1,500 VETSL debt incurred on 31 August 2020. That is:

Paula's accumulated VETSL debt formula

(2) The person incurs the accumulated VETSL debt on 1 June in the financial year.

(3) The first financial year for which a person can have an accumulated VETSL debt is the financial year starting on 1 July 2019.

23CD Rounding of amounts

(1) If, apart from this section, a person's accumulated VETSL debt would be an amount consisting of a number of whole dollars and a number of cents, disregard the number of cents.

(2) If, apart from this section, 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.

23CE Accumulated VETSL debt discharges earlier debts

(1) The accumulated VETSL debt that a person incurs on 1 June in a financial year discharges, or discharges the unpaid part of:

(a) any VETSL debt that the person incurred during the calendar year immediately preceding that day; and

(b) any accumulated VETSL debt that the person incurred on the immediately preceding 1 June.

(2) Nothing in subsection (1) affects the application of Division 2 or section 23CB or 23CC.

23CF Accumulated VETSL debt discharged by death

(1) Upon the death of a person who has an accumulated VETSL debt, the accumulated VETSL debt is taken to be discharged.

(2) To avoid doubt, this section 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.

Note: Accumulated VETSL debts are not provable in bankruptcy: see subsection 82(3AB) of the Bankruptcy Act 1966.

Division 4 - Voluntary discharge of debt

23DA Voluntary repayments

(1) A person may at any time make a payment in respect of a debt that the person owes to the Commonwealth under this Part.

(2) The payment must be made to the Commissioner.

23DB Application of voluntary repayments

(1) Any money a person pays under this Division to meet the person's debts to the Commonwealth under this Part is to be applied in payment of those debts as the person directs at the time of the payment.

(2) If the person has not given any directions, or the directions given do not adequately deal with the matter, any money available is to be applied as follows:

(a) first, in discharge or reduction of any accumulated VETSL debt of the person;

(b) secondly, in discharge or reduction of:

(i) any VETSL debt of the person; or

(ii) if there is more than one such debt, those debts in the order in which they were incurred.

23DC Refunding of payments

If:

(a) a person pays an amount to the Commonwealth under this Division; and

(b) the amount exceeds the sum of:

(i) the amount required to discharge the total debt that the person owed to the Commonwealth under this Part; and

(ii) 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 equal to that excess.

Division 5 - Compulsory discharge of debt

Subdivision A - Compulsory repayments

23EA Compulsory repayments

(1) If:

(a) a person's repayment income for an income year exceeds the minimum repayment income for the income year; and

(b) 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 this Division, so much of the person's repayable VETSL debt for the income year as does not exceed the amount worked out using the formula:

Repayable VETSL debt formula

where:

applicable percentage of repayment income means the amount that is the percentage of the person's repayment income worked out in respect of the income year using the table in section 154-20 of the Higher Education Support Act 2003.

relevant income-contingent loans liability means the amount that is the sum of any amounts the person is liable to pay under section 154-1 or 154-16 of the Higher Education Support Act 2003 in respect of the income year.

(2) A person is not liable under this section to pay an amount for an income year if the amount worked out under subsection (1) is zero or less.

(3) A person is not liable under this section to pay an amount for an income year if, under section 8 of the Medicare Levy Act 1986:

(a) no Medicare levy is payable by the person on the person's taxable income for the income year; or

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

23EB Repayable VETSL debt for an income year

(1) A person's repayable VETSL debt for an income year is:

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

(b) if one or more amounts:

(i) have been paid in reduction of that debt; or

(ii) 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.

(2) A reference in paragraph (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

23EC Liability of overseas debtors to repay amounts

(1) If:

(a) a person is a foreign resident during an income year; and

(b) the person's assessed worldwide income for the income year exceeds the minimum repayment income for the income year; and

(c) 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 this Division, a levy of the amount worked out under subsection (2).

Note: An amount a person is liable to pay under this section is imposed as a levy under the Student Loans (Overseas Debtors Repayment Levy) Act 2015.

(2) The amount of levy that a person is liable to pay under this section, in respect of an income year, is an amount equal to the difference between:

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

(i) the person had a repayment income for the income year of an amount equal to the person's assessed worldwide income for the income year; and

(ii) subsection 23EA(3) did not apply to the person; and

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

23ED Notices to be given to the Commissioner

Notice relating to leaving Australia

(1) A person who:

(a) has an accumulated VETSL debt or otherwise has a VETSL debt that has not yet been discharged; and

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

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

(2) A person who:

(a) has an accumulated VETSL debt or otherwise has a VETSL debt that has not yet been discharged; and

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

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

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)

(3) A person who:

(a) is a foreign resident; and

(b) on 1 June immediately preceding an income year, had an accumulated VETSL debt;

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.

Note: The Commissioner may defer the time for giving a notice: see section 388-55 in Schedule 1 to the Taxation Administration Act 1953.

Content of notices under this section

(4) The rules may provide for the content of notices under this section.

Subdivision C - Assessments

23EE Commissioner may make assessments

The Commissioner may, from any information in the Commissioner's possession, whether from a return or otherwise, make an assessment of:

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

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

23EF Notification of notices of assessment of tax

If:

(a) 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

(b) the Commissioner has made, in respect of the person, an assessment under section 23EE of this Act of the amounts referred to in that section; and

(c) notice of the assessment under that section has not been served on the person;

notice of the assessment under that section may be served by specifying the amounts concerned in the notice referred to in paragraph (a) of this section.

23EG Commissioner may defer making assessments

(1) A person may apply in the approved form to the Commissioner for deferral of the making of an assessment in respect of the person under section 23EE.

(2) The application must specify:

(a) the income year for which the deferral is being sought; and

(b) the reasons for seeking the deferral.

(3) The income year specified in the application must be:

(a) the income year in which the person makes the application; or

(b) the immediately preceding income year; or

(c) the immediately succeeding income year.

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

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

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

(5) The Commissioner may defer making the assessment for any period the Commissioner thinks appropriate.

(6) The Commissioner must, as soon as practicable after an application is made under this section:

(a) consider the matter to which the application relates; and

(b) notify the applicant of the Commissioner's decision on the application.

Note: Deferrals of making assessments, or refusals of applications, are reviewable under Part 7.

23EH Commissioner may amend assessments

(1) A person may apply in the approved form to the Commissioner for an amendment of an assessment made in respect of the person under section 23EE so that:

(a) the amount payable under the assessment is reduced; or

(b) no amount is payable under the assessment.

(2) The application:

(a) must be made within 2 years after the day on which the Commissioner gives notice of the assessment to the person; or

(b) must specify the reasons justifying a later application.

(3) The Commissioner may, on application by a person under this section, amend an assessment made in respect of the person under section 23EE so that:

(a) the amount payable under the assessment is reduced; or

(b) no amount is payable under the assessment;

if the Commissioner is of the opinion that:

(c) payment of the assessed amount has caused or would cause serious hardship to the person; or

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

(4) The Commissioner must, as soon as practicable after an application is made under this section:

(a) consider the matter to which the application relates; and

(b) notify the applicant of the Commissioner's decision on the application.

Note: Amendments of assessments, or refusals of applications, are reviewable under Part 7.

Division 6 - Application of tax legislation

23FA Returns, assessments, collection and recovery

Subject to Divisions 4 and 5 and this Division:

(a) Part IV of the Income Tax Assessment Act 1936; and

(b) Division 5 of the Income Tax Assessment Act 1997; and

(c) Part 4-15 in Schedule 1 to the Taxation Administration Act 1953;

apply, so far as they are capable of application, 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.

23FB Charges and civil penalties for failing to meet obligations

(1) Part 4-25 in Schedule 1 to the Taxation Administration Act 1953 has effect as if:

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

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

(2) Subsection (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.

23FC Pay as you go (PAYG) withholding

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 it 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.

23FD Pay as you go (PAYG) instalments

Division 45 in Schedule 1 to the Taxation Administration Act 1953 applies, so far as it 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.

23FE Failures to comply with section 23ED

Part III of the Taxation Administration Act 1953 applies in relation to a failure to comply with section 23ED of this Act as if that section were a taxation law (within the meaning of section 2 of that Act).

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

The Commissioner has the general administration of this Act to the following extent:

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

(b) this Part;

(c) Part 7 so far as it relates to reviewable decisions for which the Commissioner is the decision maker;

(d) section 97 (Commissioner may disclose VET information);

(e) section 107 (verifying tax file numbers).

Note: One effect of this is that this Act is to that extent a taxation law for the purposes of the Taxation Administration Act 1953.