The overseas graduates in debt make up approximately 1.3 percent of all HECS debtors, which corresponds to about the same proportion of the country’s total HECS debt of AUD74 billion ($49 billion).
The overseas graduates in debt make up approximately 1.3 percent of all HECS debtors, which corresponds to about the same proportion of the country’s total HECS debt of AUD74 billion ($49 billion).
Australian graduates living overseas currently owe over AUD1 billion ($664.4 million) in HECS-HELP loans, according to data from the Australian Tax Office.
HECS-HELP, formerly known as HECS, stands for Higher Education Contribution Scheme as part of the Higher Education Loan Program.
The overseas graduates in debt make up approximately 1.3 percent of all HECS debtors, which corresponds to about the same proportion of the country’s total HECS debt of AUD74 billion ($49 billion), ATO added.
The analysis revealed that a historically high 7.1 percent indexation would further increase the amount owed by graduates overseas by an additional AUD70 million ($ 46.5 million). In the 2021-22 financial year, there were 40,200 overseas graduates, each owing an average of AUD25,776 ($17,126), approximately AUD1,000 (US$664) more than the overall average.
Until 2016-17, leaving Australia offered a reprieve from compulsory repayments, but this loophole closed with the introduction of the overseas debt recovery bill. Former education minister Simon Birmingham estimated that around AUD30 million ($19.9 million) was lost annually due to graduates leaving Australia before this legislation was passed. Since 2017, approximately AUD300 million ($199.3 million) has been recovered from graduates’ overseas income.
The ATO now requires people leaving Australia for more than six months to lodge an overseas travel notification, and if their income exceeds the threshold, they must make compulsory repayments. The change in legislation was aimed at both ensuring integrity and collecting owed debts. The ATO uses passport matching to track individuals who leave the country with a HECS debt.
International tax accountant Marlena Smit highlighted that many overseas graduates, especially those who left before the law changed, find themselves unexpectedly owing tens of thousands of dollars in compulsory repayments. Graduates abroad paid AUD66.2 million ($43.9 million) on their overseas income in 2021-22, with an additional AUD9.6 million ($6.3 million) paid based on Australian income. They also made AUD29 million ($19.2 million) in voluntary repayments.
“What we see are Australians with many years of incorrect or no worldwide income reporting whatsoever. When they finally get up to speed with their compliance, the repayable balance is often excessive,” said Smit.
While the policy appears to have positive effects and better results than similar systems in the UK and New Zealand, the number of HECS debtors who left Australia before the law change remains unclear. However, it is anticipated that the amount repaid will increase as more graduates who graduated after the change begin making repayments. Nevertheless, for those who never return to Australia, the chances of full repayment are slim due to the inherent difficulties in collecting from people overseas, according to Mr. Norton.
“The reality is that we largely have a repayment system based on the Australian taxation system, and therefore inherently that makes it more difficult to collect from people overseas,” he said.
“In many cases, the enforcement costs in trying to recover from someone in another country probably exceed the value of the loan,” he added.
The ATO stated that it takes a differentiated approach to engage with clients with outstanding obligations, aiming to work in partnership with them to resolve their situations. Penalties or other enforcement actions may be taken if necessary and appropriate, the statement added.
