Repealing the voluntary repayment bonus
The Student Loan Scheme (Budget Measures) Act 2012 repealed the student loan voluntary repayment bonus introduced in 2009 as it did not lead to faster repayments.
Sections 118 (repealed), 121(1)(a) (repealed), 121(1)(b) (repealed), Part 3 Subpart 1 (repealed), 110, 111 of the Student Loan Scheme Act 2011
Sections 31(2), 32, 37, 39, 40 of the Student Loan Scheme Amendment Act 2012 all repealed
Background
The objective of the bonus scheme was to encourage faster repayments by borrowers who were slow to repay their student loan and, as a consequence, to reduce the costs to the Government of the Student Loan Scheme. The voluntary repayment bonus took effect from 1 April 2009 and gave borrowers a 10% bonus for any repayments of $500 or more over and above the borrower's repayment obligations.
The voluntary repayment bonus is not fulfilling its policy intent of encouraging faster repayments from those slow to repay and the level of savings from the voluntary repayment bonus is lower than originally estimated. The take-up of the policy has largely been by individuals who were already paying back their loans quickly.
Key features
The Student Loan Scheme Act 2011 and the Student Loan Scheme Amendment Act 2012 have been amended to repeal the voluntary repayment bonus.
- The voluntary repayment bonus will be repealed from 1 April 2013 with effect from the 2013-14 tax year.
- Payments that are made after the 2012-13 tax year but are deemed to have been made in that tax year (for example final interim payments due on 7 May 2013) will continue to be included in the bonus calculation for that tax year.
- Voluntary repayment bonuses granted for the 2012-13 year will be taken into account when assessing overseas-based borrower repayment obligations for the 2013-14 tax year.
Application date
The repeal of the voluntary repayment bonus comes into effect on 1 April 2013.
The consequential amendments to how overseas-based borrower obligations are set come into effect on 1 April 2014.
Detailed analysis
The terms "10% bonus" and "final excess repayment" are no longer defined in the Act (section 118 repealed).
Borrowers will no longer be eligible for a 10% bonus on excess repayments from 1 April 2013 (sections 121(1)(a), 121(2)(b) and subpart 1 of Part 3 all repealed).
When an overseas-based borrower's repayment obligation is determined the consolidated loan balance is no longer adjusted to take into account any voluntary repayment bonus for the previous tax year (sections 110 and 111 both repealed).
The spent amending provisions in the Student Loan Scheme Amendment Act 2012 are repealed (sections 31(2), 32, 37, 39, 40 all repealed).