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.
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
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.
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.
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.
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.
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.
Employers should consider taking the following actions:
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
Michael Wall (Immigration)
Tel. +61 2 9335 8625
Victoria, South Australia, and Tasmania
Ben Travers (Tax)
Tel. +61 3 9288 5279
Jacqui Tucker (Tax)
Tel. +61 8 8236 3378
John Unger (Immigration)
Tel. +61 3 9288 5725
Ivan Hoe (Immigration)
Tel. +61 8 9263 7181
Dan Hodgson (Tax)
Tel. +61 8 9278 2053
Queensland and Northern Territory
Hayley Lock (Tax)
Tel. +61 7 3434 9176
Philip Duncan (Immigration)
Tel. +61 7 3434 9196
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.
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