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Second Reading: Education Legislation Amendment (Overseas Debt Recovery) Bill 2015, Student Loans (Overseas Debtors Repayment Levy) Bill 2015
It is great to follow the member for Canberra, who spoke a little bit about her experiences at university, being a great product of the Deakin electorate and one of our very proud products, so it is wonderful to follow her and speak in a similar vein on the Education Legislation Amendment (Overseas Debt Recovery) Bill 2015.
I, in many respects, will echo some of the comments made by the member for Canberra. This is a very logical, very fair and very reasonable change. At the moment, those people who have had the benefit of a world-class Australian education, subsidised by taxpayers through the HELP or, when I went through university, the HECS loan system, are people who have benefited from that taxpayer support. We should always expect that those people who leave Australia to work or travel—it is a rite of passage for many people to do that after university—not be, in effect, exempted from repaying their HECS or HELP debt. But at present, if a person is not a tax resident of Australia and therefore not required to lodge an Australian tax return, there is no mechanism for the Australian Tax Office to compel or require that person to make the mandatory HELP or HECS repayment obligations. This legislation fixes that. This legislation simply says, ‘If you are somebody who has HELP debt, you have left Australia, you are working and you are earning over the required threshold, which is $54,000 or thereabouts, we will now ask of you that you meet those HELP repayments in the same way that people who have a HELP debt do when working in Australia.’
My background, before I came into parliament, is as a lawyer. I have many friends—friends from university and colleagues in my law firm—who followed a bit of a rite of passage and went to work in London, New York, Hong Kong or Singapore. Inevitably, those people did not repay their HELP debt for the period of time that they were not working in Australia. Some of them have not returned and some of them are unlikely to ever return, and they have not been repaying their HELP debt. But somebody like me, who has worked in Australia for their whole life, has done that and has paid that back.
Every single day and every pay cheque, I looked at my HECS debt being slowly taken out. I was never grumpy and I was never disappointed with that, because I would not have been in my job and I would not have been earning the salary that I was were it not for the world-class education that I received at university. It was subsidised by taxpayers. Let us remember, the HECS system, as I went through it, was the best loan that any of us would ever get in our lives. I was grateful every single day to the Australian taxpayers for funding that education, so I was never angry when I saw that repayment coming out every pay cheque.
Similarly, we believe and evidence suggests that self compliance with these changes will be remarkably high. Evidence from Canada and the UK suggests that anywhere from 70 to 75 per cent of people will automatically comply with a requirement that they now register. We will communicate with them that, once they register, they can voluntarily repay their HECS or HELP debt. That is an extraordinarily high percentage: 70 to 75 per cent. I would expect—and call me parochial—that Australians would probably exceed those numbers, because we have an absolute sense of duty and fairness to Australia. I am confident that Australian people who have a HELP debt, who are working overseas and who are earning over that threshold of $54,000 a year will feel that obligation and will voluntarily comply with their requirement to now repay their HELP debt. Because let us remember, they would not be there in many cases were it not for the education that taxpayers in this country subsidised for them.
Now, the member the Canberra raised a number of very relevant questions around process: how do we contact these people, how do we ensure that people who are subject to repayments are aware of their obligations, how do we make it as easy as humanly possible for those people to meet those obligations and how do we make a very clear process to determine the $54,000 threshold in Australian dollar terms and how that relates to foreign currencies in other jurisdictions? I am very confident that the minister, the ATO and the department will be able to work these things through in a sensible way, because this is really not about going to the four corners of the world and trying to shake money out of people’s pockets.
That is not the way and that will not be the way happens, because it will be a fundamental requirement we keep the costs of enforcing these rules low. That is because, as the modelling suggests, these changes will have a net impact of about $150 million over 10 years. Inevitably, and it is not an insignificant amount of money, we would not want to be spending too much money to chase that down. We will be largely relying on good communication with those people and self compliance from them. As I said, the evidence from Canada and the United Kingdom is heartening and I am very confident that Australians will not shirk their responsibility.
This is an issue of fairness. The HELP debt system now has accumulated debts in the order of $60 billion. Inevitably, the government will not collect all of that. There is an embedded loss, in effect, to the government for a range of reasons. There are people who have undertaken study and never reached the $54,000 threshold or whatever the threshold may be indexed to be over time. Obviously, that HECS debt will never be repaid, because that person has never met the threshold. Who wears that cost? Well, taxpayers wear it. As a society who values fairness, we would not to make life unduly difficult people who are not earning a sufficient salary to make repayments.
That just highlights why this change is so important for people who are, in many cases, in very well-paid professions and jobs—and I spoke about many of my former university friends and colleagues, who are working in law firms, accounting firms or investment banks overseas—and earning fantastic money. I know they will rise to the challenges of their obligations to repay their HECS debt, because each and every one of them would not be in that role, would not be in that job or would not have the career that they have were it not for this education system and the funding of their education by taxpayers through the HECS or HELP system.
Similarly, if you are a student who is undertaking the rite of passage that many people take—taking a gap year or, in the case of some people I know, taking a gap three years—good luck to you, I say. They are not earning a very high income or any income at all. They will not be required to repay because they will never be earning the $54,000 threshold. Those people will not be impacted. I stress that those people will go about their business and, hopefully, once they have got that travel out of their system, they will come back to Australia and will start repaying that debt.
One other thing to think about here is people who leave Australia to work and, in many cases, earn fantastic salaries who never return. In a sense, these changes will ensure that we get that money back, which we would never have got. That forms part of the $150 million over 10 years. But there are also many people who will inevitably come back, whether it is after two years, three years, five years or 10 years. They will come back to an accumulated HECS or HELP debt that has not changed at all. One of the beauties of our system is that you make small repayments over time. I think those people will look back and think, ‘I wish I had just chipped away at that over the last two, three, five or 10 years, rather than coming home and having this accumulated HECS debt that has been indexed to CPI, which I have not actually chipped away at all.’ From a purely practical perspective I think there are many people who, as I have said, will voluntarily enter this scheme, will voluntarily report their income to the ATO and will ensure that those payments are made.
For those who are recalcitrant, who become aware of these changes but blatantly refuse to submit to repaying their HELP or HECS debt, the ATO has a range of powers available. The ATO is very sensible in exercising those powers. As a former tax lawyer myself, I think the ATO can be unfairly maligned at times, because it does take a fairly practical approach to these things. If there is an individual who is blatantly refusing to meet these requirements, even though they are earning over the $54,000 threshold, the ATO has a range of powers to ensure that penalties are applied—penalties that in many cases will be referable in percentage terms to the debt that they owe the Commonwealth.
There are more punitive measures, like orders that would stop somebody from departing Australia, if they were to return for a short period of time without submitting to those rules. So there is a stick, in a sense. The ATO does carry that stick, but I am very optimistic that that will be the exception, not the rule. I think that, as with the experience of the UK and Canada, as I have said a couple of times, we will see voluntary compliance here. People will understand the inherent fairness and equity of these changes and will submit to ensuring that they repay their HELP and HECS debt, in a sense to meet their obligation but also to thank the Australian taxpayers for subsidising their education. We should never, ever forget that.
As Australians we talk a lot about rights: ‘I have a right to this, I have a right to that and I have a right to the other.’ In fact, we do not have a right to any dollar of another taxpayer’s money, but as a society we have chosen to help those people. There are public policy reasons why we want a great education for everybody. We want an absolutely great education for everybody. But, as a consequence of that, when you have accepted a loan from the taxpayer, you submit to repaying that when you are able to do so. Therefore, if they are earning over $54,000 in another jurisdiction, I am confident that Australians will meet those obligations in droves.
I am certain that these rules will remain very uncontroversial, as they are. I am pleased to see that they have bipartisan support and I think that indicates how reasonable and sensible they are. As somebody who, like most people in this House, was blessed with a tertiary education funded by the taxpayers, and having many friends in that situation, I know the gratitude that those people have to the Australian government and Australian taxpayers for their tertiary education and I know that they will have no problem in meeting the obligations of the overseas debt recovery bill.
It is great to speak in favour of this. Let’s just make it happen, get it going and, more importantly, let’s assist the ATO in any way we can to make this process as seamless as possible. We do not want to make this difficult for people; we want it to be easy. A government should make it easy for people to repay money. I am confident that we will do that, and I commend the bill to the House.
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