How HELP affects your tax

A Higher Education Loan Program (HELP) allows students to defer payment of University tuition (and some other forms of higher education) until after they have completed their studies and joined the workforce. For more information on how HELP works visit the [goingtouni.gov.au website.|http://www.goingtouni.gov.au/Main/Quickfind/PayingForYourStudiesHELPLoans/Default.htm]

The following is a brief guide to how a HELP debt grows and how it affects your tax:

Personal income repayments

Once you’ve finished studying and got yourself a job you will need to begin paying back your HELP/HECs loan. The more you earn from your job, the more you will be expected to pay back on your loan. If you earn less than around $47,000 a year you won’t have to pay anything, while those on over $87,000 will be forced to payback 8% of earnings. You HELP payments should automatically be taken out of your pay, but it’s important to check this with your employer, as any unpaid debt will need to be made up by you come tax time.

*HRI = Taxable income plus any total net investment loss (which includes net rental losses), total reportable fringe benefits amounts, reportable super contributions and exempt foreign employment income.

The debt will grow

Thankfully a HELP debt is not charged interested like money spent on a credit card. What does happen, however, is that on the 1st of June every year indexation is applied to the part of the HELP debt that has remained unpaid for more than 11 months. Indexation maintains the real value of the debt by adjusting it in line with changes in the cost of living as measured by the Consumer Price Index (CPI). The indexation figure is calculated each year after the March CPI is released and the indexation rate will determine how much the HELP debt increases.

Voluntary HELP repayments

You can also make voluntary repayments on your HELP debt to the Australian Taxation Office. You can receive a reduction bonus of 10% off repayments that:

• are $500 or more, or
• clear your debt.