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How your HECS-HELP debt will affect your tax

·Director Of Tax Communications, H&R Block
·5-min read
Compilation image of pile of $100 Australia dollar notes and graduates throwing their hats in the air
You only need to start repaying your student debt once your income reaches the minimum repayment threshold. (Source: Getty)

When you’re starting out at university or at TAFE, repaying your student debt would probably be the last thing on your mind. But the fact is, once you start earning the threshold amount those repayments will begin.

Here’s everything you need to know about repaying your student debt, and what it means for your taxes.

What is HECS-HELP?

HECS-HELP has two components – it is both a loan and a student discount.

For example, if you are an eligible student, the Australian Government (through the HECS-HELP scheme) will pay your course fees for you. The Australian government pays the amount of the loan directly to your education institution.

Read more from Mark Chapman:

Loan repayments are then made through the Australian taxation system when your income reaches a certain threshold (currently $48,361 for the 2022-23 financial year). It is possible to make voluntary repayments at any time regardless of income.

A HECS-HELP debt is incurred immediately following the elected 'census' date for any University course you have nominated to receive HELP assistance for.

Am I eligible for HECS-HELP?

To qualify for HECS-HELP, you must:

  • Be studying in a Commonwealth supported place

  • Be an Australian citizen, a New Zealand Special Category Visa holder who meets the long-term residency requirements; or a permanent humanitarian visa holder

  • Be enrolled in each unit at your university by the census date

  • Meet the relevant HECS-HELP residency requirements

  • 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 need to start repaying my HECS-HELP loan?

Repaying you HECS-HELP debt commences once your Help Repayment Income (HRI) is above the minimum repayment threshold for compulsory repayment. That is, once your adjusted taxable income reaches a certain level.

The HRI thresholds are adjusted each year but the minimum HRI threshold to make a loan repayment for 2022-23 is $48,361.

Where income exceeds this threshold, a compulsory repayment of at least 1 per cent of your income is raised in your income tax assessment. The percentage then increases as your income increases.

Rates for 2022-23 are as follows:

Repayment income (RI)

Repayment rate

Below $48,361

Nil

$48,361 – $55,836

1.0%

$55,837 – $59,186

2.0%

$59,187 – $62,738

2.5%

$62,739 – $66,502

3.0%

$66,503 – $70,492

3.5%

$70,493 – $74,722

4.0%

$74,723 – $79,206

4.5%

$79,207 – $83,958

5.0%

$83,959 – $88,996

5.5%

$88,997 – $94,336

6.0%

$94,337 – $99,996

6.5%

$99,997 – $105,996

7.0%

$105,997 – $112,355

7.5%

$112,356 – $119,097

8.0%

$119,098 – $126,243

8.5%

$126,244 – $133,818

9.0%

$133,819 – $141,847

9.5%

$141,848 and above

10%

What is HELP Repayment Income (HRI)?

Your repayment income is different to your taxable income. It is calculated as:

  • 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

Is there interest charged on my student loan?

Not as such.

But on June 1 each year, indexation is applied to any part of your student loan that has remained unpaid for more than 11 months.

Indexation maintains the real value of the loan by adjusting it in line with changes in the cost of living as measured by the consumer price index (CPI) – the inflation rate.

As inflation is currently high, that means that student loans in 2022 were indexed by 3.9 per cent and it is likely that the indexation rate will remain high in 2023.

How to check your HECS-HELP debt balance

There are two main ways to check your HECS-HELP debt balance:

  1. Contact the Australian Taxation Office (ATO) on 13 28 61, and provide them with your TFN. With this they are able to verify your personal details and tell you your HECS-HELP balance.

  2. View your HECS-HELP balance online via the myGov site. You will need to link your account to the ATO so they have all the details. From here, you view your balance online.

How to repay you HECS-HELP debt though the taxation system

Compulsory repayments

When commencing a new job make sure you indicate to your employer that you have a HECS-HELP debt. This is done by ticking a box on the tax declaration form you will complete before starting work.

Your employer will withhold additional tax from each pay to cover your estimated HECS-HELP debt liability based on your annual HRI. The additional tax withheld by your employer should cover this repayment.

Note: Your employer only withholds the additional tax based on the income they pay to you. They won't take into account other income - from second or previous jobs or investment for instance - so you may have to make a top-up payment once you lodge your tax return.

Voluntary repayments

You are able to make voluntary repayments to your debt at any time to the ATO by BPAY and credit card. Visit the ATO or your nearest H&R Block office for more information about how to make repayments and the best time to do so.

Tax tips for repaying your HELP debt

Keeping receipts and claiming deductions for everything you’re entitled to can reduce your HRI and minimise your compulsory annual repayment amount. It is important to keep all work related receipts and to take advice on what you can claim in order to maximise your refund.

If you are working more than one job, each employer will only withhold additional tax to cover your HECS-HELP debt based on the income that they pay you. If your combined income from multiple employers is over the minimum repayment threshold, you will still be liable to make a repayment towards your HECS-HELP debt when you lodge your tax return.

Mark Chapman is director of tax communications at H&R Block.

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