Student Assistance Act 1973:Factor to index Financial Supplement debts and accumulated Financial Supplement debts
Explanatory Statement
General Outline of Instrument
This instrument calculates and publishes the indexation factor to be used to index Financial Supplement debts and accumulated Financial Supplement debts on 1 June 2005.
The instrument is made under subsection 12ZF(7A) of the Student Assistance Act 1973.
The proposed instrument would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Date of effect
This Instrument applies from 1 June 2005.
What is this instrument about:
This instrument is made by the Commissioner of Taxation (Commissioner) pursuant to the Student Assistance Act 1973 and provides for the calculation and publication of the indexation factor used to index the Financial Supplement debt and accumulated Financial Supplement debt.
What is the effect of this instrument:
The effect of the instrument is that it advises taxpayers of the indexation factor to be used to index their Financial Supplement debt and accumulated Financial Supplement debt on 1 June 2005. The instrument also provides the method for the calculation of the indexation factor.
Background:
Under the Student Assistance Act 1973, the Commissioner has been required to calculate and publish the indexation factor to be used to index Financial Supplement debts and accumulated Financial Supplement debts from 1 June 1998.
The Student Financial Supplement Scheme commenced on 1 January 1993 and was a voluntary loan scheme for tertiary students to help cover their expenses while they study. The Financial Supplement debt is maintained by the Commonwealth Bank of Australia (CBA) for the first five years that the loan is taken out and indexation is applied on those debts by Centrelink. In the fifth year, the Financial Supplement debt is bought back from the CBA by Centrelink and transferred to the Australian Taxation Office (ATO) for collection. The ATO applies the indexation factor to the accumulated Financial Supplement debts it maintains.
Subsection 12ZF(7A) of the Student Assistance Act 1973 requires the Commissioner to calculate and publish before each 1 June the indexation factor used to index Financial Supplement debts and accumulated Financial Supplement debts existing on that 1 June.
The indexation factor is calculated for each 1 June of a given income year and is based on the last 8 quarters of index numbers. An index number is made up of the All Groups Consumer Price Index number, being the weighted average of the 8 capital cities, as compiled and published by the Australian Statistician.
The indexation factor is then used by Centrelink and the ATO to index Financial Supplement debts and accumulated Financial Supplement debts, respectively. Following indexation of the debts, Centrelink issues a loan statement for debts that are being maintained by the CBA and the Commissioner issues an information statement for those debts the ATO maintains. The loan statement and information statement advise every client of the amount that their Financial Supplement debt or accumulated Financial Supplement debt has increased or decreased as a result of the indexation factor.
Consultation:
The Commissioner is satisfied that consultation is unnecessary and inappropriate in relation to this Instrument, however, he does advise Centrelink of the indexation factor to be used to index Financial Supplement debts.
The legislative requirement to calculate and publish the indexation factor is a machinery measure required by subsection 12ZF(7A) of the Student Assistance Act 1973.
Commissioner of Taxation
11 May 2005
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[release date]
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