For students (and past students), there are a lot of things to consider that non-students don’t have to think of when it comes to tax time, like HECS-HELP – so we spoke to the Director of Tax Communications at H&R Block Mark Chapman, to have him answer some FAQs by students and point out how HECS-HELP affects you and your taxes.
So let’s start with the basics –
What Is HECS-HELP?
HECS-HELP is both a loan and a student discount. Let’s say you’re an eligible student – the Australian Government (through the HECS-HELP scheme) will pay your course fees for you. If you pay your course fees upfront ($500 or more), you can use the scheme to receive a discount.
The Australian Government will pay the amount of your loan or discount directly to your education institution. Once your income reaches a certain threshold (currently $55,874 for the 2017-2018 financial year), loan repayments are then made through the tax system. If you wanted to pay off your debt faster, you can make voluntary repayments, regardless of how much you earn.
A HECS-HELP debt kicks off immediately after the elected ‘census’ date for any University course you’ve nominated to receive HELP assistance for.
Footnote: so if you are looking to change subject or courses, make sure you do it BEFORE census date at your University.
Am I Eligible for HECS-HELP?
To qualify for HECS-HELP, you have to meet the following standards:
- Be studying in a Commonwealth supported place;
- Be an Australian citizen; or
- Be a New Zealand Special Category Visa holder who meets the long-term residency requirements; or
- Be a permanent humanitarian visa holder;
- Be enrolled in each unit at your university by the census date;
- Meet the relevant HECS-HELP residency requirements; and
- Submit a valid request for Commonwealth support and HECS-HELP form by the census date (or earlier administrative date) to your university.
When do I have to repay my HECS-HELP?
Your HECS-HELP debt repayments will take effect through your taxes once your income surpasses the compulsory repayment threshold, even if you’re still studying.
The minimum Help Repayment Income (HRI) thresholds change each year. To make your loan repayments for 2017-18, the threshold is set at $55,874. Where income exceeds this threshold, a compulsory repayment of at least 4% of your income takes effect as part of your tax assessment. The percentage increases in tandem with your income.
How much of my income gets given to HECS-HELP repayments?
Looking at the HECS-HELP Tax Rates for 2017-18
Repayment income (RI*)
$55,874 – $62,238
$62,239 – $68,602
$68,603 – $72,207
$72,208 – $77,618
$77,619 – $84,062
$84,063 – $88,486
$88,487 – $97,377
$97,378 – $103,765
$103,766 and above
From 1 July 2018, a new lower income repayment threshold of $42,000 will be ushered in with a repayment rate of 1%. Higher threshold bands will increase to a top 10% repayment rate on income over $119,882. If you fall into these categories, have a chat to one of our tax consultants.
What Is the HECS-HELP Repayment Income threshold?
Your HECS-HELP repayment income (HRI) differs from your taxable income. Calculate it like this:
- Your taxable income for an income year, plus
- Your total net investment losses, plus
- Any total reportable fringe benefit amounts shown on your PAYG payment summary; plus
- Reportable super contributions; and
- Any exempt foreign employment income from the current income year.
When it comes to tax time, your H&R Block consultant will help you understand and calculate what your HRI threshold is.
How do I check my HECS-HELP debt balance?
There are a couple of ways to check how much you owe on your HECS-HELP debt balance:
- Contact the ATO on 13 28 61, and provide them with your TFN. This way, they can verify your personal details and tell you your HECS-HELP balance.
- View your HECS-HELP balance online via the myGov site. If you link your account to the ATO, you’ll be able to see your balance online.
Repaying Your HECS-HELP Loan
Compulsory HECS-HELP Repayments
When you start a new job, make a note to let your employer know you’ve got a HECS-HELP debt. Just tick the box on your TAX DECLARATION FORM which you’ll need to fill out before you get to work.
Your employer will set aside additional tax from each pay to cover your estimated HECS-HELP debt based on your annual HRI. Keep in mind, your employer will withhold the additional tax based on the income they pay to you. They won’t factor in other income sources, previous jobs or investments. So, if you’ve got any of these sources of income, you’ll have to make a top-up payment once you lodge your tax return.
Voluntary HECS-HELP Repayments
If you like to stay ahead, you can make voluntary repayments anytime to the ATO by BPAY or credit card. Visit the ATO’s website for more information on how and when to make repayments.
Tax Tips for Repaying Your HECS-HELP Debt
Upfront organisation will save you precious pennies. Keep all work-related receipts and claim deductions for everything you’re entitled to. This can reduce your HRI and minimise your compulsory annual repayment amount. For advice on what you can claim, have a read through our ultimate guide to tax deductions.
Calculate Your Tax Refund With a HECS-HELP Debt
Calculate your estimated tax refund including the HECS-HELP debt with this tax calculator tool.