Effect of bankruptcy on Financial Supplement Loan (FSL) after transfer to the Australian Taxation Office (ATO) 102-15010060

The funds for the FSL were provided by the Commonwealth Bank of Australia (CBA). When the student applied for FSL, the student entered into a loan contract with the CBA for a contract period. All loans were administered by Centrelink (now Services Australia) until the end of the contract period. At the end of the contract period, the outstanding loan was transferred to the Australian Taxation Office (ATO). The loan then became a debt to the Commonwealth and is repayable through the taxation system.

Bankruptcy has no effect on the repayment of the FSL amount as FSL is not a provable debt (as it is not immediately repayable).

A customer who declares bankruptcy after the debt was transferred to the ATO may have a portion of the debt discharged but it is only the portion that is immediately payable.

Note: any part of the loan that has been assessed as payable to the ATO as part of the customer's Tax Assessment is considered to be due immediately, and therefore can be included as a liability in terms of a person's bankruptcy assessment.

If further information is required the customers should be referred to ATO.

Note: the final balance on all outstanding loans will show as zero on Services Australia's system. This does not mean that the loan has been zeroed off, just that the balance has now been transferred to the ATO for recovery through the taxation system.