Tools for Your Trade federal grants spent by apprentices on tattoos, mag wheels and parties

The federal government intends axing the Tools for Your Trade grants program for a loans scheme because apprentices misused the scheme instead spending the money on tattoos, fancy wheels on their cars, and partying.

The Industry Minister Ian Macfarlane says tax-exempt cash grants of up to $5,500 were paid to apprentices doing training in areas of established skills shortage but without receipt for tools.

"I think the whole skills and training area was just hanging out to be rebuilt or streamlined, and so we’ve stepped in and done that,” he told the Australian Financial Review Weekend.

 “We’ve got evidence that they were spending the money on tattoos and mag wheels for their cars, and birthday parties,” Mr Macfarlane said.

“Because the money was basically being thrown at them they just spent it on whatever they wanted to.

“You certainly didn’t have to provide a receipt for tools. I think the whole skills and training area was just hanging out to be rebuilt or streamlined, and so we’ve stepped in and done that.”

The Coalition will replace Tools for Your Trade with the Trade Support Loans program, which will provide interest-free loans of up to $20,000, similar to HECS for tertiary students, to support them through their training.

It will offer apprentices loans of up to $20,000 at concessional interest rates over a four-year apprenticeship. Apprentices will need to begin repaying their loan when their income exceeds a minimum annual threshold ($53,345 in 2014-15).

The loans will be available to apprentices doing a certificate III or IV qualification that leads to an occupation on the national skills needs list.

The budget papers say that apprentices who successfully complete their training will receive a 20% discount on the amount to be repaid.

The money will be capped at $8,000 in the first year of the apprenticeship, $6,000 in the second, $4,000 in the third and $2,000 in the fourth.

The loan program will cost $439 million over five years.

The budget is set to save almost $1 billion over the next four years by scrapping the Tools for Your Trade program from 1 July this year.

This program was originally introduced by the Howard government.