To make your loan repayments for 2019-20, the threshold is set at $45,881. The main reason is that if you make a voluntary repayment towards your HELP/HECS debt, but you still have a HELP/HECS debt owing as at 30 June of that financial year, then you will still have an obligation to make a compulsory repayment IN ADDITION to the voluntary repayment that you have already made! This is because your other form of debt is likely to have an interest rate higher than the HECS indexation rate. The amount of the discount is paid by the Government to the student’s higher education provider. You may say what is the point of saving money if your HECS debt is compounding at 1.8% a year and most high-interest saving accounts provide interest amounts less than that. How can you check your HECS repayment debt? The repayment thresholds and rates are updated annually for the compulsory repayment of. There is $1989 in debt remaining. If you need to make future major expenses such as a car or travel, then you should save the money rather than making voluntary HECS repayments. Seek a qualified tax professional on more information that is tailored towards your financial circumstances. HECS repayment occurs once you are over the repayment income threshold. *In order to attract the 5% ‘bonus’, you need to make an additional voluntary repayment of $500 or more. The compulsory repayment threshold is different each year. You can find more information via the ATO website. This website is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website. If you still have debt after making the voluntary payment, you may still be required to make a compulsory repayment. How does the compulsory HECS repayment actually work? Are you going to take a loan such as a mortgage? So, as of 1/1/2016, the AUS Government is removing the 5% bonus for additional HECS repayment over $500. On checking my ATO online account I can see that $805 has been credited to my HECS debt as my “compulsory repayment credit”. The ATO will send you a sheet of payment slips to use once you agree on an amount. If you are in a sticky situation such as losing a job, it will be better to have an emergency fund ready. If you make a voluntary repayment of $500 or more, you will receive a bonus of 5 per cent. HECs (Higher Education Contri… Not anymore. Your repayment income is the sum of the below amounts: The ATO calculator can help you calculate your repayment amount. You will then be able to see the balance you have currently in HECS. This means your account will be credited with an additional 5 per cent of the value of your payment. You will need to click onto the ATO page, then click on loan accounts as shown below. This means your debt amount will grow slowly to align with the general rise in prices of goods and services. Click here to see ATO information regarding going overseas. Usually, it is best to pay down other forms of debt first before making voluntary HECS repayments. I go over these key topics to help you manage your HECS-HELP debt! Until December 31, 2016, if you make a voluntary … The Department of Education and Training will update the HELP booklets and the Commonwealth Assistance Form for Commonwealth supported places and HECS HELP. Below is a snippet of the HECS repayment rates. I am considering paying some of my debt back to get an immediate 5% return. So advice cannot be offered here, but some comments may help. Are you wondering how do HECS repayments work and whether you should make voluntary HECS repayment? You should consider whether the information applies to you and your individual needs. It does not take into account your personal circumstances. To lodge a voluntary payment online, you must provide a payment reference number (PRN). However, if you are simply making purchases on impulses, it will be better to pay down your HECS debt. You can make voluntary repayments at any time to reduce the balance of your debt. Click here to read my blog post on how to budget! You can check your HECS debt via MyGov. For the 2017/2018 threshold rates visit ATO Hecs Repayment Thresholds and Rates. Below is a snippet of the HECS repayment rates. The removal of the upfront discount will affect students who can afford to pay upfront and choose to do so. If you are debt free, investing or saving can be a good option, Ms Browne adds. All compulsory HECS-HELP payments from overseas are made through your tax return which can be lodged from July through myGov. For tailored advice, you will need to speak to your trusted tax advisor. Once you earn over this threshold, you will need to make a repayment, depending on how much you earn. The discount for voluntary repayments of a pre-2005 HECS debt was reduced from 15% to 10% from 1 January 2005. Voluntary repayment are in addition to the compulsory repayments make through your tax return. This is then so you can meet you future need requirements! From 1 January 2017, the Australian Government will remove the upfront HECS-HELP discount of 10 per cent for eligible students that pay their student contributions upfront and the voluntary HELP repayment bonus of five per cent. HECS-HELP loan (we will simply refer it to HECS) is an initiative by the government where students that meet the requirements are able to defer their higher education fees. In the past, people could get a discount on voluntary student debt repayments — which made that option more attractive — but the discount was removed from 2017. This is made up of: The debit amount is the amount you owe and credits are amounts that reduce the balance such as if you made a voluntary payment. Did Toilet Paper Save us from a Recession in Australia? “From January 2017, discounts on up-front contributions to the education provider and voluntary payments of $500 or more to HELP debt were discontinued.” If the payment amounts you can reasonably afford are quite low, you’ll need to go through the ATO’s hardship department to arrange payment.Refer to Tax debts for the process. Taxable income for the income year (your assessable income subtract deductions); Any total reportable fringe benefits amounts; Any exempt foreign employment income from the current income year. "The value of the student debt is indexed to the CPI [Consumer Price Index] each year, which was 2.1 per cent in March 2017. The minimum Help Repayment Income (HRI) thresholds change each year. How does this work if I was below the $43,151 threshold and I had no reportable fringe benefits? If I received the extra money I could have made a voluntary contribution to my HECS debt and received a bonus 10% on that payment. You can also make voluntary repayments. Higher Education Loan Program (HELP) VET Student Loan (VSL) Student Financial Supplement Scheme (SFSS) Student Start-up Loan (SSL) ABSTUDY Student Start-up Loan (ABSTUDY SSL) Trade Support Loan (TSL). People who have a HELP debt and make a voluntary repayment of $500 or … Voluntary repayments. If the information relates to a specific product, you should consider the Product Disclosure Statement before making a decision about whether to acquire it. A Personal Finance Blog for Young Aussies. This is because you may be able to earn more than how much you will save by paying off your HECS early. Otherwise, you may be hit with a huge tax bill during tax time. How paying off HECS-HELP has become even less attractive ... Financial advisers warn low inflation combined with the government's move to strip incentives for voluntary repayment … Yes…..you can make a voluntary repayment to the ATO at any time for any amount. When you notify your employer you have HECS, extra tax is usually taken out of your payslip. Repayment income. HECS-HELP debt has to be repaid through the taxation system once your repayment income is above the compulsory repayment threshold, even if you are still studying. “There are now no tax benefits associated with early repayment of HELP debt,” Dr West said. I was entitled to a tax refund, yet the ATO still took part of that refund and applied it to my HECS debt? However, this amount is low and also known as inflation indexation. What are the Compulsory HECS Repayment Rates? The bonus for voluntary repayments will only affect people who can afford to make voluntary repayments above what are required when annual tax returns are assessed. The minimum HRI threshold to make a loan repayment for 2019-20 is $45,881. In 1995, the Government introduced a bonus for voluntary repayment ($500 or more) of HECS debt. On Monday, the Hecs (Higher Education Contribution Scheme) repayment threshold fell by more than 11%. Jason is passionate in helping young Australians manage their personal finances. This rate can vary every year. Does paying off your HECS early help at tax time? Depending on your financial circumstances, it may be better to make voluntary HECS repayments. Make sure to notify your employer if you do have a HECS loan. For the 2020-21 income year, the compulsory repayment … Overseas repayments Your HECS-HELP debt repayments will take effect through your taxes once your income passes the compulsory repayment threshold, even if you’re still studying. Note: The 5% voluntary repayment bonus ceased on 1 January 2017. Your debt will continue to be indexed every year until the entire debt is repaid. This 5% bonus currently applies to voluntary HECS/HELP repayments of $500 or more. As shown in the above diagram, there are many factors you may consider whether to make HECS repayments voluntarily. Commonwealth supported students who are eligible for HECS-HELP and elect to fully pay, or part pay $500 or more of, their student contribution amount upfront to their higher education provider currently receive a discount of 10 per cent. Why was this amount refunded to me instead of credited to my debt? As a blog, it should not be taken as a substitute for professional advice from a trusted financial adviser. "The current repayment rate is 4 per cent of taxable income on this lower threshold, and rises by income bands to 8 per cent above $103,766 per annum, and the employer withholds this repayment alongside withholding tax. Changes to the HECS-HELP discount and voluntary repayment bonus, Providers that offer Commonwealth assistance, VET Student Loan or VET FEE-HELP debt complaints, Cancel your HELP debt under 'Special Circumstances', Remitting very remote teachers HELP debt - Application form available. Instead, you will pay back the amount as compulsory repayments when you start earning over the repayment income threshold. Your payslip may not necessarily show the amount of tax allocated to the HECS repayment amount. Disclaimer:  This blog is not meant to be tax advice but rather general and educational in nature. Many people would say that HECS is interest-free. On 1 January 2012, the voluntary repayment discount was reduced to 5%, and was removed completely from 1 January 2017. For 2020-2021, the minimum threshold amount is $46,620. That is, once your taxable income reaches a certain level. You should also consider seeking independent legal, financial, taxation or other advice from a licenced adviser that relates to your unique circumstances. You pay back your HELP debt through the tax system once you earn above the compulsory repayment threshold. For 2020, it is 1.8%. From now on, anybody earning over $45,881 … The HECS-HELP program allows eligible Commonwealth supported students to defer their student contribution and repay it later through the taxation system. You may still have to make a compulsory repayment or pay an overseas levy if, after making your voluntary repayment: you still have a debt; your repayment … It is an amount never recovered by the Government. If you think you can earn more than the inflation rate by investing, it would make more sense to invest your money. What is the interest/indexation rate for HECS? Currently, any voluntary repayment over $500 gets you a 5% discount The compulsory repayment threshold is adjusted each year. The repayment rates vary depending on how much income you earn. For 2020-2021, the minimum threshold amount is $46,620. From 1 January 2017, the government will remove the 5% voluntary repayment bonus for HECS/HELP loans. This process is similar to other forms of debt such as credit cards, just at a lower rate. The change to the upfront discount will only affect HECS-HELP. Whether you should make voluntary HECS repayments depends on your financial circumstances. When you prepare your tax return, you will then make a calculation whether you paid too much or too little tax to the ATO to cover both your tax on your taxable income and the repayment rate amount for your HECS. Thank you for reading my blog post on what is HECS and whether you should pay down your HECS early. The compulsory repayment threshold for the 2019-20 income year was $45,881. Study Assist is an initiative of the Australian Government. Technically, there is still interest paid on your loan. If you were thinking about making a voluntary payment towards your HECS/HELP debt, do it before 31 December 2016 to take advantage of the 5% discount. Changes to the HECS-HELP discount and voluntary repayment bonus Cameron Allen November 28, 2016 January 7, 2020 From 1 January 2017 the federal government will remove the HECS-HELP discount of 10% for eligible students who pay their contributions upfront as well as removing the voluntary HELP repayment bonus of 5%. Then, you would be better able to meet your other obligations like rent and utilities if times become tough. I will now explain each factor in detail. Make a repayment arrangement with the ATO. 2017 changes Changes to funding of universities and the HECS were made as part of the 2017 Australian federal budget. Voluntary versus compulsory payments on HECS-HELP loans On your own you can make voluntary repayments on what’s left, but these still won’t replace compulsory ones. You can make a voluntary repayment to the ATO at any time and for any amount. You may still have to make a compulsory repayment or pay an overseas levy if, after making your voluntary repayment: you still have a debt your repayment income is above the minimum repayment threshold. This also applies if your repayment … You can view the entire repayment income rates via the ATO website. However, you only need to make compulsory HECS repayments if you earn more than the repayment income. Although it is indexed only to inflation, your debt is still compounding, just at a low rate. However, it was as high as 2.9% back in 2012. Indexation rate changes – As mentioned above, the indexation rate was 2.9% in 2012. Commonwealth supported students who are eligible for HECS-HELP and elect to fully pay, or part pay $500 or more of, their student contribution amount upfront to their higher education provider currently receive a discount of 10 per cent. 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