Retaining the current penalty interest rules on unpaid amounts

Sections 2, 139, 141, 221 (repealed), schedule 7 (repealed) and sections 2 and 57 (repealed) of the Student Loan Scheme Amendment Act 2012.

Changes to the late payment interest regime due to come into force on 1 April 2013 have been repealed thereby retaining the existing late payment interest rules to:

• charge on the amount outstanding the day after the due date and monthly thereafter
• only charge if each repayment obligation in default is $334 or more, and
• only charge if a borrower fails to make full payment by the final instalment date of the obligation.

Changes have also been made to link the late payment interest rate to the annual loan interest rate. The annual loan interest rate is based on an average of the 10-year government bond rate. Linking late payment interest with the annual interest rate ensures that it reflects current interest rates. The late payment interest rate will now be the annual loan interest rate plus 4% calculated at an equivalent monthly rate. For the 2013-14 tax year, the monthly late payment interest rate reduces from 0.843% to 0.789%.

The late payment interest rate has also been reduced for borrowers who are under agreed instalment arrangements to repay overdue amounts. For each month that a borrower keeps to an instalment arrangement, late payment interest will be charged at the annual loan interest rate plus 2% calculated at an equivalent monthly rate. For the 2013-14 tax year, the monthly reduced late payment interest rate is 0.635%.

Application date

The amendments apply from 1 April 2013.