Australia – Nonresidents Required to Repay Their Australian Education Debt

Australia – Nonresidents Required to Repay Their

This GMS Flash Alert reports that recent legislation in Australia has altered the rules on recovery of Higher Education Loan Programme (HELP) and Trade Support Loan (TSL) debts for debtors who are nonresidents for Australian tax purposes.

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Recent legislation in Australia brings significant changes to the recovery of Higher Education Loan Programme (HELP) and Trade Support Loan (TSL) debts for debtors who are nonresidents for Australian tax purposes.1

WHY THIS MATTERS

Individuals who are not Australian tax residents and have Australian higher education debts (HELP and TSL) will now be required to repay these loans based on their worldwide income.  This will apply from 1 July 2016.

From 1 January 2016, individuals with these Australian higher education debts who are going overseas with the intention to remain outside Australia for more than 183 days will be required to register with the Australian Taxation Office within seven (7) days of leaving Australia.

Individuals who are already overseas will be required to register by 1 July 2017.  

Employers should communicate these changes to their employees, and consider assisting employees with their registration and reporting obligations.

Background

Previously, nonresident individuals with no Australian sourced income were not required to make HELP/TSL debt repayments.  Any repayments from nonresident debtors were voluntary.  It was therefore advantageous for individuals to become nonresidents to avoid making repayments on their HELP/TSL loans.

This treatment was changed with enactment of the Education Legislation Amendment (Overseas Debt Recovery) Bill 2015, which received Royal Assent on 26 November 2015.  

Registration Requirements

From 1 January 2016, individuals going overseas with the intention to remain outside Australia for more than 183 days will be required to register with the Australian Taxation Office (ATO) (via their myGov account) within seven (7) days of leaving Australia. 

Individuals already living overseas will need to update their details no later than 1 July 2017.

Worldwide Income Reporting and Repayment Requirements

Repayments will be required where the individual’s worldwide income exceeds the minimum repayment threshold which is indexed annually (currently, A$54,126 for the year ending 30 June 2016). 

At this stage, the individual’s worldwide income needs to be reported to the ATO by 31 October each year.

Further guidelines will be published on how to calculate that worldwide income (including how to convert it into Australian currency) as well as the details of when and how this information needs to be provided.

Repayment obligations will commence from 1 July 2017, for income earned in the tax year commencing 1 July 2016.  Penalties can apply for a maximum of A$3,600 for a notification that is not made, increasing for subsequent offences.

KPMG NOTE

Impact on Employees – Including Expatriate Employees – and Their Employers

Employees are currently required to advise employers in Australia that they have education-related debts.  Employers are then required to deduct and remit employee contributions through the payroll system. 

The withholding does not and will not apply to nonresident employees.  However, Australian nonresident employees will be accustomed to having their repayments managed through the payroll system, and may struggle to calculate and report their worldwide income, as well as finance the repayment as a lump sum at tax return time. 

Employer Considerations 

Employers should consider taking the following actions:

  • Communicate these changes to their Australian employees working overseas.
  • Consider deducting additional hypothetical tax during assignments in anticipation of the expected liability.  
  • Consider the level of assistance employees may need with their registration and reporting requirements.
  • Review the equalisation policy for any necessary changes.

FOOTNOTE

1  For further information, see the ATO’s Web page “Overseas Repayments.”  

For further information or assistance, please contact your local GMS or People Services professional, or one of the following professionals with the KPMG International member firm in Australia:

 

New South Wales and Australian Capital Territory 

Andy Hutt (Tax)]

Tel. +61 2 9335 8655

ahutt@kpmg.com.au

 

Michael Wall (Immigration)

Tel. +61 2 9335 8625

mwall2@kpmg.com.au 

___________________________________________________________

Victoria, South Australia, and Tasmania

Ben Travers (Tax)

Tel. +61 3 9288 5279

btravers1@kpmg.com.au

 

Jacqui Tucker (Tax)   

Tel. +61 8 8236 3378  

jtucker@kpmg.com.au   

 

John Unger (Immigration) 

Tel. +61 3 9288 5725

junger@kpmg.com.au

___________________________________________________________

Western Australia 

Ivan Hoe (Immigration)

Tel. +61 8 9263 7181

ihoe@kpmg.com  

 

Dan Hodgson (Tax)

Tel. +61 8 9278 2053

dghodgson@kpmg.com.au

___________________________________________________________

Queensland and Northern Territory 

Hayley Lock (Tax)

Tel. +61 7 3434 9176

hlock@kpmg.com.au   

 

Philip Duncan (Immigration)

Tel. +61 7 3434 9196

pduncan1@kpmg.com.au

The information contained in this newsletter was submitted by the KPMG International member firm in Australia.

© 2016 KPMG Australia Pty Limited, an Australian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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