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Australian graduates who move overseas will have to pay back student loans

Debt lost from graduates working overseas is estimated to cost the taxpayer around $30m a year. www.shutterstock.com

Australian graduates who move overseas will have to pay back student loans

Debt lost from graduates working overseas is estimated to cost the taxpayer around $30m a year. www.shutterstock.com

University graduates who move overseas for more than six months will now have to pay back their student loans.

Until now, graduates who moved abroad were under no obligation to repay their student debt while they lived in another country.

The bill, introduced by Education Minister Simon Birmingham, aims to recoup lost debt estimated to have cost the taxpayer around A$30 million a year.

From January 2016, Australians who live in another country for more than six months will have to notify the Australian Tax Office to start paying back their loans.

Birmingham said: “As well as making the scheme fairer and more equitable, the government’s changes will improve the sustainability of the scheme, with taxpayers to benefit by A$150 million over the next decade.”

The public cost of unpaid HELP debts is large and growing, so recovering debts from graduates moving overseas will help trim back that cost, said Geoff Sharrock, program director of the L.H. Martin Institute, University of Melbourne.

But the government’s plan to apply different levels of repayment at different income thresholds in the same way as here in Australia is a bit cumbersome, added Sharrock.

“It asks those working overseas to calculate their tax in two systems so that a repayment level can be calculated.

"A flat annual rate regardless of income would be simpler to administer than what the government is introducing, for the Australian Tax Office and the individual.

"The government could base a flat rate on the minimum repayment applying here regardless of income level, of say A$2,200 a year, which at the moment applies to locals earning more than A$54,000.”

While the bill will help the government to recoup money, Ittima Cherastidtham, senior associate in the higher education program at the Grattan Institute, said this saving is small, at just A$25 million over the next two years.

A bigger saving could come from recovering debt from deceased estates worth more than A$100,000, said Cherastidtham. This would reduce the cost of HELP by more than A$500 million a year.

With less than 10% of graduates working abroad for more than one year early on in their careers, there is a concern that it will be difficult for the government to track students who don’t volunteer this information about moving abroad.

“Unlike the UK we don’t have the power to use legal action to recover all the debt at once, which would make legal action overseas more viable,” said Cherastidtham.

Graduates who don’t disclose this information, however, will face fines of up to A$3,600 upon re-entering Australia.