Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

I might take this opportunity to respond to some comments made in relation to this bill during the previous debate. I noted with great interest the comments of Senator McKenzie and the suggestion that the Australian Liberal and National parties are now, apparently, the bastions of fairness in Australian politics. 'Through the looking glass' indeed, because this comes at the same time that the Liberal and National parties have been talking about increasing the GST from 10 to 15 per cent—a huge impost on Australian families. We know that the Liberal and National parties are the parties that tend to focus on the interests of the rich and powerful, but when it comes to the most vulnerable members of our community they are missing in action. So much of this particular legislative approach seems to be based on this idea of the mythical Australian graduate who is earning hundreds of thousands of dollars a year working on Wall Street. But what about the Australian graduate who is on an average income, who is not aware of these taxation arrangements and who finds themselves caught completely unawares by this change to the legislative regime?

Honourable Senators:

Honourable senators interjecting—

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Mr Temporary Chairman, I rise on a point of order. I do not think the good senator can hear himself talk, at the moment, there is so much noise in these chambers.

The TEMPORARY CHAIRMAN: Thank you, that is a fair point. I ask senators who wish to continue their conversations to do so elsewhere.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

The point I was making is that our concern is about those young people and Australians who are living overseas who are not aware of the change to the taxation regime. People plan their lives on the basis of this kind of legislation, and to expect Australians who are expats living overseas to follow the vagaries of Australian politics seems naive and out of step with the way that most people plan their lives. That is why the Australian Greens have been advocating for a different approach.

I find it ironic, in the extreme, that the Liberal and National parties would accuse the Greens of being a party that does not stand up for fairness in this place. It is ironic, indeed, when one considers the record of this Liberal-National government when it comes to budget cuts that target the most vulnerable in our community and a plan to increase HECS and increase the cost of living for each and every Australian through a great big new tax on everything. The Australian Greens are proud of the role that they play in advocating for fairness in this parliament, and certainly will not be lectured by the Liberal-National coalition, in that regard.

I have some questions for the minister. How will the government inform foreign residents of the changes to their compliance responsibilities under this bill?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

By and large, it is incumbent upon individuals with tax obligations or student loan obligations to be aware of changes, in relation to those arrangements, and to comply with the tax laws of Australia if they have a tax obligation. In the end, a student loan repayment operates just like a tax obligation, in that regard.

We want to make sure that there is a focus on communicating with those affected by the measure and informing them of new requirements where possible. We are not asking for anything onerous—simply that people are brought into line with what would be expected of them were they still living in Australia. We will be using data-matching capabilities, including data exchange, with the United Kingdom to help locate debtors who are overseas. The application of similar arrangements for reciprocal student loan debt recovery is being discussed with New Zealand. This is not unprecedented. Other countries have successful, efficient overseas debt recovery programs. There is no reason to expect that Australia could not achieve similar arrangements.

It is important to appreciate and understand that not only does the tax office have the ability to run communication strategies that may complement the standard operating procedures, regarding expectations around what Australian taxpayers or those with student loans are expected to be aware of, but also—noting where you are probably going with this issue—the ATO does have a degree of discretionary power that it can apply where people have reasonable explanations for not necessarily complying in a timely manner with any particular changes. I also draw your attention to the fact that the time line for repayment in this regard is some way down the track, so we are looking at a situation where people will not have to make contributions until 1 July 2017.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

I thank the minister for his response. Of the expenditure identified in the 2015-16 budget, how much will go towards informing foreign residents of their new responsibilities?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

We do not expect there to be an onerous cost to the government in the application of this measure. We are, of course, expecting that people are aware of their responsibilities. We want to have a situation where people who are debtors register, which is why there is that requirement. There is a new obligation requiring debtors who are going overseas for longer than six months or who have lived overseas for longer than six months to notify the ATO. This is an obligation that begins from 1 January 2016. Those already overseas will have until 1 July 2017 to register. Those debtors who have been overseas for six months but have not registered we expect can be identified through some of the data-sharing arrangements between the ATO and the Department of Immigration and Border Protection, as well as the application of the reciprocal arrangements that I spoke about earlier.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

What penalties will the government pursue against overseas travellers who fail to report to the tax office that they intend to leave the country for over six months?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

Penalties for noncompliance are the same as penalties for noncompliance in relation to any Australian and their tax or student debt obligations. Equally, as I said before, the ATO does have some capacity, in assessing the application of penalties, to take into account individual circumstances or valid reasons that may be given by individuals through those circumstances.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

How will the government enforce that? Will they extradite people to Australia to ensure that they answer penalties here in our country? How will that be enforced?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

Of course, enforcement is a matter that the ATO would consider, but I think we would be some way down the track before we got to a point of considering such measures as that which you have suggested.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

Will the government be pursuing students with current existing HELP or TSL debt who take a gap year or gap semesters overseas but do not report to the ATO?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

As I have made clear, the expectation is that students would register if they are more than six months overseas. If they are earning an income in excess of their repayment threshold—currently slightly more than $54,000—then they are expected to repay. That is just as, if they take a gap year and work within Australia during that gap year and earn more than $54,000, they are expected to make repayments. And that is just as, if they happen to be part-time students who work and earn more than $54,000, they are expected to make repayments.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

Will the government be helping foreign residents to assess their worldwide income, or will it be on each foreign resident to do that component themselves?

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

People are responsible for reporting their income, just as they are responsible for reporting their income through any part of the tax system.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

by leave—I move Greens amendments (1) and (2) on sheet 7781:

(1) Clause 2, page 3 (table item 6), omit "items 6 to 10", substitute "items 6 to 12".

(2) Schedule 1, item 11, page 8 (lines 5 to 21), omit the item, substitute:

11 Application of section 154 -16

  Section 154-18 of the Higher Education Support Act 2003, as inserted by this Act, applies to persons who leave Australia after the commencement of this item.

12 Application of amendments—pre -commencement debt

(1) If:

  (a) immediately before commencement a person is a foreign resident for an income year (the first income year); and

  (b) immediately before commencement the person has an accumulated HELP debt or otherwise has a HELP debt that has not been discharged; and

  (c) the person does not incur any additional HELP debt after commencement for the first income year or any later income year (other than any additional debt that arises as a result of indexation of the person's accumulated HELP debt or other HELP debt);

  the amendments made by this Schedule to the Higher Education Support Act 2003 do not apply in relation to the person:

  (d) for the first income year; and

  (e) if the person continues to be a foreign resident for one or more later income years—each later income year for which the person continues to be a foreign resident.

(2) In this item:

  commencement means the day on which this item commences.

13 Application of amendments—pre and post -commencement debt

(1) If:

  (a) immediately before commencement a person is a foreign resident for an income year; and

  (b) immediately before commencement the person has an accumulated HELP debt or otherwise has a HELP debt that has not been discharged (pre-commencement debt) for the income year; and

  (c) the person incurs additional HELP debt after commencement for an income year (other than any additional debt that arises as a result of indexation of the person's accumulated HELP debt or other HELP debt) (post-commencement debt);

  then:

  (d) the amendments made by this Schedule to the Higher Education Support Act 2003 apply in relation to any post-commencement debt (including any indexation of that debt); and

  (e) section 154-16 of that Act, as inserted by this Schedule, does not apply in relation to the pre-commencement debt.

Note: Paragraph (1)(e) only relates to the levy under section 154-16 (which is imposed under the Student Loans (Overseas Debtors Repayment Levy) Act 2015), it does not affect any other liability for payment under the Higher Education Support Act 2003.

(2) In this item:

  commencement means the day on which this item commences.

(3) Schedule 2, item 10, page 13 (lines 5 to 21), omit the item, substitute:

10 Application of section 47C

  Section 47C of the Trade Support Loans Act 2014, as inserted by this Act, applies to persons who leave Australia after the commencement of this item.

11 Application of amendments—pre -commencement debt

(1) If:

  (a) immediately before commencement a person is a foreign resident for an income year (the first income year); and

  (b) immediately before commencement the person has an accumulated TSL debt or otherwise has a TSL debt that has not been discharged; and

  (c) the person does not incur any additional TSL debt after commencement for the first income year or any later income year (other than any additional debt that arises as a result of indexation of the person's accumulated TSL debt or other TSL debt);

  the amendments made by this Schedule to the Trade Support Loans Act 2014 do not apply in relation to the person:

  (d) for the first income year; and

  (e) if the person continues to be a foreign resident for one or more later income years—each later income year for which the person continues to be a foreign resident.

(2) In this item:

  commencement means the day on which this item commences.

12 Application of amendments—pre and post -commencement debt

(1) If:

  (a) immediately before commencement a person is a foreign resident for an income year; and

  (b) immediately before commencement the person has an accumulated TSL debt or otherwise has a TSL debt that has not been discharged (pre-commencement debt) for the income year; and

(c) the person incurs additional TSL debt after commencement for an income year (other than any additional debt that arises as a result of indexation of the person's accumulated TSL debt or other TSL debt) (post-commencement debt);

  then:

  (d) the amendments made by this Schedule to the Trade Support Loans Act 2014 apply in relation to any post-commencement debt (including any indexation of that debt); and

  (e) section 47A of that Act, as inserted by this Schedule, does not apply in relation to the pre-commencement debt.

Note: Paragraph (1)(e) only relates to the levy under section 47A (which is imposed under the Student Loans (Overseas Debtors Repayment Levy) Act 2015), it does not affect any other liability for payment under the Trade Support Loans Act 2014.

(2) In this item:

  commencement means the day on which this item commences.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

The opposition does not support the amendments to the bill that are proposed by the Greens. The measures in the bill are straightforward. They apply the same liabilities to Australians living overseas as they do to Australians at home. Under the current law, Australians living overseas are required to report their income to the Australian Taxation Office. If a person leaves to go overseas and does not earn income above the threshold, they do not pay their HECS liability, so they are not affected, just as the case applies in this country. The effect of the Greens amendments is to provide a tax holiday to students or former students who are earning above the threshold while living overseas.

The Labor Party remains a very strong supporter of HECS. It is a measure that requires defence by this parliament. The integrity of HECS requires the defence of this parliament, because it is a fundamental social contract entered into to preserve the principles of public good in higher education. The Commonwealth helps cover the cost of university education. The individual benefits from that process but does not have to provide a return on the loan until such time as average weekly earnings are achieved. It is a fundamental social justice measure which has led to the mass expansion of higher education in this country, and I think rightfully is regarded as one of the great achievements of the Hawke Labor government. To propose that people be allowed to go offshore and not pay their tax is a fundamental breach of that contract. It is to validate the tax avoider. Why should we support that?

I am concerned about the practicalities of any administrative action. The government tells us that these measures will apply to 46,000 people but also tells us that only 38,000 people are actually expected to make payments. However, I think the administrative difficulties can be resolved, given the time lines that are being proposed in this legislation and given the resources that we have with regard to the cooperation between the tax office and the immigration department.

When students signed up for HECS there was no clause saying, 'If you work overseas, you are not obliged to meet your obligations.' So I cannot fathom why the Greens, who claim to speak for the downtrodden, will stand up for people who go overseas to avoid a modest contribution to our higher education scheme. Frankly, these are measures that are long overdue, and working people of this country have a right to be curious as to why we have not acted on this earlier. Why should working Australians who do the right thing in paying their taxes, effectively subsidise those who are earning above the income of $54,000 a year—which, of course, is above average weekly earnings—and allow them to abrogate their responsibilities to the Australian taxation system?

It is said that the Greens are increasingly representing the more wealthy people in this country. This is one of those cases where I see the Greens fulfilling their new role—that is, the role which says that they want to protect the best social conscience that money can buy. That is exactly what you are doing with these measures, and that is why we will not be supporting them.

Robert Simms (SA, Australian Greens) Share this | Link to this | Hansard source

I wish to respond to Senator Carr's comments in summarising the Greens' position. Of course, I do thank Senator Carr for reminding us that it was the Labor Party that was the architect of the HEC Scheme in this country—the Labor Party that moved away from free education in this country and saddled generations of students with debt; generations of students who have seen that debt increase as the Liberal government increased HECS a little bit further and built on the work of and the foundations laid by the Labor Party. Senator Carr has referred to it as one of the great achievements of the Hawke and Keating government. I would be very interested to know the views of the National Union of Students and other student organisations who continue to advocate against the unfairness that is at the heart of the HECS system.

Indeed, it was that moment when the Labor Party were in government and initiated HECS that destroyed the concept of free education in this country. And once you let the genie out of the bottle, there is no putting it back in again. What we have seen is the Howard government come in with their agenda to increase HECS fees by 30 per cent and build on the work of the Labor Party and then of course the Abbott government pursuing their deregulation agenda, which sought to even further shift the cost burden onto students away from the public good. That is the work that the Labor Party began when they were in government and is the project that the Liberal-National Party have continued. So I thank Senator Carr for reminding us of that contribution.

I also want to make the point that this approach seems to be premised on this notion of a mythical Australian expat who, upon graduating from their studies here in Australia, boarded a plane in some elaborate effort to avoid paying back their HECS liability. What a bizarre proposition that is! The reality is that we are not talking about a group of people who are tax avoiders, who are skipping the country in some elaborate effort to avoid paying tax; we are talking about ordinary Australians who happen to be living overseas, for whatever reason, who suddenly find that the tax regime in their home country, their previous country, has changed. I am not quite sure how they are meant to become aware of this development. The minister has not shed any light on that. Perhaps they are meant to study The Australian or continue to monitor ABC online and keep an eye on changes to the domestic taxation arrangements here in Australia. It does seem a rather bizarre proposition to expect ordinary Australians who are living overseas to keep such a close eye on domestic politics here in Australia. Indeed, as has been the experience over the last three or so years, it is a space that moves quite quickly. So to expect Australians living overseas to keep track of that is curious indeed.

What the Greens are seeking to do here is provide a level of clarity to people who could find themselves caught out by this unusual tax regime. We are also trying to ensure that we do not trap people retrospectively—that we do not go down the path of applying legislation and a new legislative arrangement to a whole group of people who operated under the previous taxation regime. Senator Carr made the point that, when people took on board a HECS debt, they never thought that they could move overseas and not have to pay HECS. Yes, they did. That was the reality of the HECS regime. That has been the reality of the approach that has been taken in this country since, as Senator Carr has pointed out, the Labor Party initiated the HEC Scheme and undermined free education in this country. Since that point, it has been a feature of the system that, if you happen to live and work overseas, you do not have to pay HECS. Tonight, the Labor Party and the Liberal Party want to change that approach. We have taken the very sensible position of saying that, if you are going to do that, do not apply it retrospectively. Give people a little bit of notice. Let's not base our approach to taxation on this idea that there is some mythical graduate skipping the country to try to create some tax haven over in the UK just so they can avoid paying HECS. Give us a break! So I encourage you to support the amendments that the Greens have put forward.

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

Because the government has not expressed a view on this yet, I do want to explain the government's opposition to this amendment—and let the record show that this is an occasion not oft seen in this place, when Senator Carr and I find ourselves in significant agreement about the lack of logic behind the approach of the Australian Greens. As I acknowledged in my summing-up speech, I think the advent of the HECS system, which has morphed over time into the HELP program, is indeed one of the great accomplishments of public policy in this country. It is a demonstration of the fact that a good policy stands the test of time. The HECS loan system has stood through the Hawke and Keating governments, the Howard government, the Rudd and Gillard governments, and the Abbott and Turnbull governments, and I have no doubt that it will stand long into the future. Indeed, such an income-contingent loan system has been modelled and utilised by other countries, which have based themselves very much on the Australian experience. It is an important model because it recognises that benefits accrue to the individual as a result of accessing a higher education, just as benefits accrue to the public as a result of having a more educated populace and workforce.

So, it shares the costs, with a Commonwealth subsidy applied and with students making a contribution, but it ensures that that student contribution applies only when people are in a position to afford to repay it, by operating on an income-contingent level. As I emphasised in my summing-up speech, an important feature of this, though, in the generosity of this loan scheme, is that it is indexed only against the CPI. As a result, the longer that debts are outstanding the more it is that taxpayers are subsidising the loan that has been undertaken, because the cost to the Commonwealth of borrowing is greater than the CPI and therefore there is an increased and ongoing cost associated with a deferral of repayments. So the reality is that when a student completes their degree—or does not complete their degree but has accrued a debt and goes overseas and makes no repayments for the time they are overseas—they are increasing and expanding the subsidy that they benefit from as a result of the generosity of the Australian taxpayer to provide the sustainability of our higher-income-contingent loan system.

I marvel at the approach of the Greens, in some ways. In the different contributions I have heard from Senator Simms it seems that he does not want people to repay their debts except in almost exceptional circumstances. It seems, from various comments that have been made, that he does not want people to pay more tax; he does not want people to pay for university education. It is, of course, the classis magic money tree approach of the Greens. He has spoken a couple of times about the mythical Australian expat, the person who goes overseas and does not repay their HECS debt. Well, he need of course look only marginally in front of him and to his right, to Senator Whish-Wilson: I do not know whether he had a HECS debt or not at the time he lived as in investment banker in New York.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I didn't.

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

He didn't. You had already repaid it, had you, Pete?

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Free education!

Simon Birmingham (SA, Liberal Party, Minister for Education and Training) Share this | Link to this | Hansard source

Oh, really? There we go. Senator Whish-Wilson, you are older than I thought you were. I certainly went through under the HECS system, an inherently fair scheme. There are many who do travel overseas, some of whom do not ever return, and the taxpayer never sees a return on the investment in that student. There are others who spend some time overseas and, as I have outlined before, enjoy an increasing subsidy the longer they are overseas and the longer they are deferring repayment. That is why this is a fair measure. It is a long-overdue measure, but it is a measure that we can now, with confidence, bring into effect—a measure that will ensure that people living overseas have exactly the same terms applied to them as those living in Australia. We do not support the idea that seems to be being propagated that it is legitimate—whether you incurred the debt in the past, today, or in the future—to avoid repaying that debt by being overseas. You should have to repay that debt if you are meeting the terms of repayment—which, put simply, is the income-contingent threshold: earning more than $54,000 per annum in current terms.

And we are giving people appropriate notice. There is indeed time for people to get their affairs in order, and it is not expected that if people are living overseas that they would be making contributions against their loans until 1 July 2017. As Senator Carr rightly acknowledged, there is time to make sure that the implementation arrangements are rolled out effectively, that the message is communicated effectively and therefore that the debts are repaid appropriately, as they should be for anybody who is earning above the income threshold, wherever they may live.

Finally, as I failed to do so in my summing-up speech, I want to acknowledge discussions I had with Senator Lazarus, who was keen for the government to explore some alternative models in relation to the repayment of debts overseas that may in fact reflect in some way the additional subsidy being provided to students who are overseas for a longer time and see whether there may be some means to either recoup that additional subsidy or ensure that the debt is repaid faster or sooner. These discussions took place only today, so it has not been possible to necessarily fully model and consider amendments that would reflect what Senator Lazarus proposed to the government. But I do give the commitment to consider them in future discussions and to continue to work with Senator Lazarus on this issue.

Sue Lines (WA, Australian Labor Party) Share this | Link to this | Hansard source

The question is that Greens amendments on sheet 7781 be agreed to.