Edition 177 - January 2016

Australia: Free ride over for offshore residents with student loan debt

On 1 January, new rules came into force in Australia that have closed a 26-year legal loophole creating unequal student loan debt repayment conditions between domestically-based graduates and those living overseas. Previously, offshore residents with debts under the Higher Education Loan Programme or Trade Support Loan scheme were under no obligation to repay their loans, even if their income exceeded the minimum repayment threshold. Australia’s student loan repayment scheme is administered by the Australian Taxation Office (ATO), which deducts compulsory payments from the borrower’s tax for the year. Since overseas-based borrowers were not required to lodge tax returns, the ATO could not track them to arrange repayments.

Under the new rules, graduates based offshore as well as those moving offshore for a period longer than six months are required to notify the ATO to arrange repayments. From the start of the financial year on 1 July 2017, anyone with a debt under these loan schemes and earning over the current minimum repayment threshold of EUR 34 220 (AUD 54 126) will be required to make payments on their loan regardless of where they reside. Some 46 000 overseas-based borrowers will be affected by the new measure. 

Ignoring the loophole for so long has resulted in Australian taxpayers picking up a hefty tab over the years. Education Minister Simon Birmingham has estimated that non-repayment of debts from graduates living overseas has cost the country up to EUR 500 million (AUD 800 million) since the loan scheme started in 1989. The change is expected to bring in EUR 94 million (AUD 150 million) over the next decade, and make the student loans scheme fairer and more sustainable into the future. 

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