10.07.18
HELP repayment levels set to change
University fees (or other approved higher education fees) can be paid each year or, alternatively, assistance through a loan scheme may be provided by the government. Debts accrued under these schemes are collectively called HELP debts.
The Higher Education Loan Program (HELP) is divided into three schemes:
- • HECS-HELP — for eligible students enrolled in Commonwealth supported places
- • FEE-HELP — for eligible fee paying students enrolled at an eligible higher education provider or Open Universities Australia
- • OS-HELP — for eligible Commonwealth-supported students who wish to study overseas.
An individual can make repayments on their HELP debt under the following situations:
- • compulsory repayments when income exceeds the minimum thresholds (paid through the tax return at the end of the year or by asking the employer to deduct additional Pay As You Go (PAYG) withholding amounts throughout the financial year), and
- • voluntary repayments (which may be payments in addition to the annual minimum repayment levels, or where the person’s income is below the threshold above which repayment is required).
Compulsory repayments
The government has introduced legislation which introduces new levels for compulsory repayments of HELP debts. A new minimum repayment level will be applied to individuals who earn over $45,000 in a financial year. This level, between $45,000 and (currently) $51,957 will attract a repayment amount of 1% of income.
This new level is set to be introduced from 1 July 2018. The level, $45,000, will be a 25% increase above full-time annual minimum wage of $36,135. The current increase is 55% as 2017/18 repayment levels start at $55,874.
Higher threshold level
Also announced will be a new higher level repayment for individuals with a debt and earning over $131,989 in HELP repayment income. This level will be a 10% repayment level, effectively creates a top marginal tax rate for Australian residents in this situation of 57%.
The change to the HELP repayment levels will be as follows:
|
2017/18 income year |
Proposed 2018/19 income year |
||
|---|---|---|---|
|
Income level ($) |
Rate of repayment (%) |
Income level ($) |
Rate of repayment (%) |
|
|
|
Below $45,000 |
0 |
|
|
|
$45,000–$51,957 |
1 |
|
Below $55,874 |
0 |
$51,958–$55,074 |
2 |
|
$55,874–$62,238 |
4 |
$55,075–$58,379 |
2.5 |
|
|
|
$58,380–$61,882 |
3 |
|
$62,239–$68,602 |
4.5 |
$61,883–$65,595 |
3.5 |
|
$68,603–$72,207 |
5 |
$65,596–$69,530 |
4 |
|
|
|
$69,531–$73,702 |
4.5 |
|
$72,208–$77,618 |
5.5 |
$73,703–$78,124 |
5 |
|
$77,619–$84,062 |
6 |
$78,125–$82,812 |
5.5 |
|
$84,063–$88,486 |
6.5 |
$82,813–$87,780 |
6 |
|
$88,487–$97,377 |
7 |
$87,781–$93,047 |
6.5 |
|
|
|
$93,048–$98,630 |
7 |
|
$97,378–$103,765 |
7.5 |
$98,631–$104,548 |
7.5 |
|
$103,766 and above |
8 |
$104,549–$110,821 |
8 |
|
|
|
$110,822–$117,470 |
8.5 |
|
|
|
$117,471–$124,518 |
9 |
|
|
|
$124,519–$131,989 |
9.5 |
|
|
|
$131,990 and above |
10 |
Further actions
As the HELP debt is usually withheld from wages via payroll, it is important to remind clients to correctly fill out their Tax File Number declarations.
Also, clients who are living overseas need to be aware of the Australian tax implications. Since 1 July 2017, compulsory repayments are determined based on “worldwide income”. Worldwide income is:
- • HELP repayment income plus
- • foreign-sourced income (converted into Australian dollars).
If this income exceeds the threshold levels a repayment is required. Individuals have until 31 October each year to provide the following details to the ATO in relation to the prior financial year:
- • residency status
- • worldwide income.
Individuals who have HELP debts and:
- • live overseas, or
- • intend to move overseas for 183 days or more in any 12-month periodare required to update their contact details with the government within seven days of leaving Australia. This must be completed via myGov.
Last reviewed: 27 June 2018
Source: CCH
Chancellors comment
The total of HELP/HECS debt outstanding hit $54 billion as at June 2017. It is little wonder that measures are being introduced to claw this back including proposals to recover unpaid HECS/HELP debt from deceased estates. The changes to the thresholds amount to a significant tax grab and recognition of the cohort that are racking up massive HELP debts as professional students. Trustees of family discretionary trusts distributing income to their over 18 students will need to keep these thresholds in mind.