HECS/HELP debt threshold has changed. Compare how much you'll pay this year to last year – ABC News
HECS/HELP debt threshold has changed. Compare how much you'll pay this year to last year
Did you get an email from the Australian Tax Office (ATO) about your HECS-HELP debt repayment rate changing?
The 2023-24 financial year threshold has been raised, which means some who made compulsory payments in 2022-23 won't have to this year.
Last financial year, people earning more than $48,361 had to make compulsory payments.
But, as of July, people can earn up to $51,549 before they'll have to pay.
Here's what the changes mean for you.
The repayment rate is the percentage of your total annual income you'll have to pay the ATO to chip away at your debt.
The idea is that, the more you earn, the more you pay off.
For example, if you earn $66,000 a year, your HECS-HELP repayments will be 2.5 per cent of your salary.
HELP (Higher Education Loan Program) is the overarching federal government program that offers loans to students — it means students can defer paying their fees until they start earning more than a certain amount.
The most common debt you'll hear about is a HECS-HELP debt, which is for students in a Commonwealth-Supported Place (which applies to many university courses).
If you have a HECS-HELP debt, you need to let your employer know and they'll take money out of each pay cheque to cover your repayments.
The repayment rate is the percentage of your income that will be deducted from each of your pay cheques.
Indexation is a fee that is applied once year — always on June 1 — and affects the overall amount of your debt.
The thinking is that matching it with the national Consumer Price Index (CPI) will keep debts in line with inflation.
This year, the indexation rate was 7.1 per cent.
Here's what the 2023-24 financial year's repayment rates are, according to income:
We went to Andrew Norton, a higher education policy professor at the Australian National University.
"The new first threshold will mean that for 2023-24 some people will no longer have to make a compulsory repayment," Professor Norton said.
"For people with cash flow issues, that will be a small help – less than $500 a year.
"If people have the same income in 2023-24 as they did in 2022-23 then most will fall back one HELP repayment band, eg have to pay 3 per cent of their income rather than 3.5 per cent."
"The downside of course is that there will be more HELP debt left to be indexed," he said.
"We have at least one more year of high HELP debt indexation left, although inflation seems to be trending down."
Paying less now could extend total length of time it takes to pay off the loan completely — so people could end up paying more overall.
Because university graduates tend to have more earning power, promotions or new, higher-paid jobs could push up to a higher repayment rate.
"Graduate income tends to increase fairly significantly in the early years after finishing university through promotions and pay rises.
"So even though wages overall are on average going up by less than inflation, many graduates will get increases that exceed inflation.
"Those increases may put them back to the old repayment rate of higher."
It changes with each financial year.
So this isn't unusual.
The details were distributed in the lead up to July 2023, an ATO spokesperson said.
"The emails are principally a reminder about making sure the individual informs their employer about their student loan," an ATO spokesperson said.
If you've got a HECS-HELP debt, you must inform your employer.
If you've already done that, these changes should already have taken effect.
"Employers should be withholding based on the updated schedules since 1 July," an ATO spokesperson said.
"Your employer will withhold additional tax from each pay to cover the estimated student loan compulsory repayment likely to be assessed when the income tax return is lodged.
"The additional tax withheld by your employer should cover this repayment."
Here's what the ATO website says to do if you haven't informed your employer of your debt:
"If you're starting a new job, complete a Tax file number declaration (NAT 3092) and include your loan type when asked to do so.
"If you are already working and being paid, complete a Withholding declaration (NAT 3093) and include your loan type when asked to do so."
The ATO spokesperson said the most direct way to make sure you're having the right amount taken out each payday is to speak with your employer or payroll department.
But it's important to remember that employers only withhold income based on the income they pay to you — not your total income for the year.
So if you have more than one job or another stream of income, you might end up having to pay a higher percentage.
Here's how much people paid in the 2022-23 financial year based on their income:
You can check it online at the ATO website or through the myGov app.
But you need to create a myGov account and link it to the ATO.
If you're looking for your total in the myGov app, tap the Services icon and tap on the "Australian Taxation Office" link in the menu.
Once you're in the ATO menu, scroll down to the "Loan accounts" section and tap the "view" button.
The balance is what you still owe.
Yes.
There's two ways:
"Individuals can [increase] their withholding rate by agreement with their payer in writing or submitting a new Withholding Declaration to their employer advising the new withholding rate," an ATO spokesperson said.
You can make voluntary payments online — with options including BPAY and debit card — as well as via phone or mail.
But you will need your unique payment reference number (PRN).
You can find that by using the ATO portal in your myGov app.
Tap the "menu" button in the top left corner then: Tax > Accounts > Summary.
The amount of your voluntary repayment will be deducted from your total debt after being processed by the ATO, rather than waiting until you file your tax return.
Paying off your entire debt via voluntary repayments before the indexation deadline, will mean indexation will not be applied to your debt next year.
Yes, but you have to apply for this.
The ATO website says to do this, you'll need to demonstrate that:
OR
You'll have to fill out a 'Defer or amend your compulsory repayment or overseas levy' form.
You can find more information about that by going to the ATO website.
If you're unable to load the form, click here.
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