Take-home points
1. People living overseas or intend to move overseas who have a HELP or TSL debt must continue making repayments to those debts (through the ATO).
2. Previously there was a loophole in the tertiary education loan scheme where people who received loans to complete further training or tertiary education and moved overseas were not required to repay their loans until they returned to Australia.
3. From 1 July 2017, people living overseas who have an accumulated HELP or TSL debt are required to make payments towards the HELP debt when their income is above the minimum threshold ($54,126.00 for 2015-2016 year).
4. From 1 January 2016, people with a HELP or TSL debt must register with the ATO (through the online services at my.gov.au) if they already live or intend to move overseas for a total of more than six months in any 12 month period. People residing overseas must continue to update their details with the ATO to ensure repayment amounts are calculated correctly.
5. The first repayment of levies for overseas HELP/TSL debts will be 31 October 2015. HELP/TSL debts will continue to be indexed (i.e. the balance will be adjusted in accordance with the Consumer Price Index CPI) until they are completely paid off. Compulsory payments must be made towards the debt once income exceeds the minimum repayment threshold. Voluntary payments can also be made towards the debt.
6. Failure to repay HELP or TSL debts, or register with the ATO will be a breach of Australian taxation law and may result in substantial penalties and fines being imposed.
7. Details of how overseas repayments will be monitored and administered are still being developed and will be announced by the Australian government in due course.
On 26 November 2015, the Commonwealth government passed legislation amending the Higher Education Support Act 2003 and the Trade Support Loans Act 2014 to close a loophole that meant people who had a Higher Education Loan Programme (HELP) or Trade Support Loan (TSL) debt did not have to make those repayment obligations until they returned from abroad to Australia.
Registering with the ATO
The new amendments mean that from 1 January 2016, those with a HELP or TSL debt must register their details with the Australian Taxation Office (ATO) if they intend to move overseas for more than 183 days in any 12 month period within seven (7) days after leaving Australia. The purpose of registering with the ATO is to allow the tax office to monitor and calculate the amount of the levy which must be paid each year by expatriates towards their HELP or TSL debt.
People with a HELP or TSL debt who are already living abroad have until 1 July 2017 to register their details, if they have already resided outside Australia for at least 183 days in any 12 month period.
However, should an individual (who have been living overseas for more than 183 days within a period of 12 months) return to Australia and leave again, they will have to register with the ATO as at the following times:
1. Within 7 days of leaving Australia again – if they leave with the intention to be away from Australia for 183 days or more; or
2. Within 7 days of the 183 day period elapsing – if they leave with the intention to be away from Australia for less than 183 days.
Threshold
Under the Higher Education Support Act 2003 and the Trade Support Loans Act 2014 a person with a HELP or TSL debt is not required to make payments until their income exceeds the minimum threshold specified in the legislation (as at 2015-2016 financial year that threshold is $54,126.00).
What this means is that foreign residents will need to firstly determine whether or not they are a resident for tax purposes, and then assess their world-wide income converted into Australian currency (and for each particular financial year to determine if the income exceeds the minimum threshold for that particular year. If it does exceed the minimum threshold, then the repayments as a levy will need to be made through the ATO by no later than 31 October each year through the Australian Government’s www.myGov.com.au website.
The first repayment will be due by 31 October 2017.
The amount of the levy to be paid in each income year will be equal to the difference between:
(a) the amount that the person would have been liable to pay under the relevant Act 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) if the Medicare levy exemption did not apply to the person; and
(b) the amount (if any) the person is liable to pay under the relevant Act.
The Australian Government has not yet released the exact details of how the monitoring and payment of the overseas levy will be administered.
However under the amendments in order to help with the enforcement of the debt repayments, the ATO may disclose the registered information to foreign tax offices to assist in collecting the debt. Further details will be announced as the scheme develops.
Consequences
Under the amendments, a person who fails to repay HELP or TSL debts, or register with the ATO will be considered in breach of Australian taxation law and may result in substantial penalties and fines being imposed and may also be liable to prosecution for breach of taxation law. If you or someone you know currently has an outstanding HELP or TSL debts and are either living overseas or intend to go overseas for at least 6 months, we would recommend that you seek professional advice to about how the amendments may affect you and your obligations.