Voluntary repayment are in addition to the compulsory repayments make through your tax return. The repayment rates vary depending on how much income you earn. All compulsory HECS-HELP payments from overseas are made through your tax return which can be lodged from July through myGov. So, as of 1/1/2016, the AUS Government is removing the 5% bonus for additional HECS repayment over $500. Yes…..you can make a voluntary repayment to the ATO at any time for any amount. The change to the upfront discount will only affect HECS-HELP. For 2020-2021, the minimum threshold amount is $46,620. There are other factors you may consider in determining whether to make a voluntary HECS repayment. The HRI thresholds are adjusted each year. When do I have to repay my HECS-HELP? Does paying off your HECS early help at tax time? If you still have debt after making the voluntary payment, you may still be required to make a compulsory repayment. The ATO will send you a sheet of payment slips to use once you agree on an amount. Note: This news item was edited on 4 January 2016 to update date information. 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. I go over these key topics to help you manage your HECS-HELP debt! All the units you studied at university which you deferred, Interest/inflation indexation amount applied on every year. The repayment thresholds and rates are updated annually for the compulsory repayment of. You can make a voluntary repayment to the ATO at any time and for any amount. The HECS-HELP program allows eligible Commonwealth supported students to defer their student contribution and repay it later through the taxation system. Would having HECS disqualify your ability to borrow money from the bank? If the information relates to a specific product, you should consider the Product Disclosure Statement before making a decision about whether to acquire it. You pay back your HELP debt through the tax system once you earn above the compulsory repayment threshold. “There are now no tax benefits associated with early repayment of HELP debt,” Dr West said. Note: The 5% voluntary repayment bonus ceased on 1 January 2017. 7 September 2020. With the wonder of online communication, you can make a voluntary HECS debt repayment via BPAY, direct credit, credit card or if you’re yearning for the good old days, you can post a cheque to the ATO. He is currently a tax consultant at EY. 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. To lodge a voluntary payment online, you must provide a payment reference number (PRN). Although it is indexed only to inflation, your debt is still compounding, just at a low rate. There is $1989 in debt remaining. Technically, there is still interest paid on your loan. Yes you can. Are you going to take a loan such as a mortgage? So advice cannot be offered here, but some comments may help. People who have a HELP debt and make a voluntary repayment of $500 or … 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. Currently, any voluntary repayment over $500 gets you a 5% discount Did Toilet Paper Save us from a Recession in Australia? However, this amount is low and also known as inflation indexation. Additional HELP repayments can be salary packaged if you wish to pay your HECS/HELP debt off sooner. Click here to see ATO information regarding going overseas. Are you wondering how do HECS repayments work and whether you should make voluntary HECS repayment? Use our HECS/HELP calculator for salary packaging. You will then be able to see the balance you have currently in HECS. 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 … HECS is a Higher Education Contribution Scheme ; ... HECS repayment threshold & rates. Study Assist is an initiative of the Australian Government. 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. If you are having issues paying off debt, you should create a budget. It is an amount never recovered by the Government. People may have told you that HECS debt is interest-free. What are the compulsory HECS repayment rates? Voluntary repayments. To receive updates from the personal finance blog, make sure to subscribe to the blog for free! HECS repayment occurs once you are over the repayment income threshold. It’s important that you know how to repay HELP debt so you can pay it off and move on with your life! ... Making voluntary contributions will definitely help pay down the loan faster. If you think you can earn more than the inflation rate by investing, it would make more sense to invest your money. The compulsory repayment threshold for the 2020-21 income year is $46,620. Below is a snippet of the HECS repayment rates. 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. The compulsory repayment threshold for the 2019-20 income year was $45,881. A Personal Finance Blog for Young Aussies. All the information posted on this website is of a general nature and for educational purposes only. 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. IF the changes to the HECS/HELP scheme announced in the budget get through parliament, from July 2016 any HELP debt owed will be indexed at the long term bond rate instead of CPI. Many people would say that HECS is interest-free. You have to start repaying the HECS-HELP loan when your repayment income reaches the minimum threshold amount (called the HECS threshold or HELP threshold), which for 2019-2020 is $45,881. Click here to read my blog post on how to budget! There is a bonus of 5 per cent off a voluntary repayment … Indexation rate changes – As mentioned above, the indexation rate was 2.9% in 2012. The amount of the discount is paid by the Government to the student’s higher education provider. If you direct this additional income to your savings account alongside your regular $100 per week, you’ll have your $10,000 savings balance back within 18 months AND be HECS debt free. 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. You can view the entire repayment income rates via the ATO website. For more information whether you are eligible to receive a HECS loan, visit the Studyassist website. This discount was removed from 1 January 2017. You may be entitled to a refund or required to pay more in tax. I am considering paying some of my debt back to get an immediate 5% return. Overseas repayments Once you earn over this threshold, you will need to make a repayment, depending on how much you earn. Jason, 24, from Sydney, is a Finance and Law Graduate from Macquarie University. Below is a snippet of the HECS repayment rates. Study and training loan repayment thresholds and rates. 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. If you are in a sticky situation such as losing a job, it will be better to have an emergency fund ready. However, it was as high as 2.9% back in 2012. Paying uni fees upfront v taking a HECS loan Why you should take a HECS loan even if you can afford to pay upfront. 6 Tips for Gifting Money to Family Members This Holiday Season, 13 Ways to Improve your Finances Over the Christmas Break, 14 Ways to Save Money when Shopping Online, 13 Tips to Help Manage Debt for Young Aussies, Why is Maintaining A Good Credit Score Important for Young Adults. Your debt will continue to be indexed every year until the entire debt is repaid. You can check your HECS debt via MyGov. This rate can vary every year. The minimum Help Repayment Income (HRI) thresholds change each year. The Department of Education and Training will update the HELP booklets and the Commonwealth Assistance Form for Commonwealth supported places and HECS HELP. Why was this amount refunded to me instead of credited to my debt? That means you do not have to pay the tuition fees upfront. *In order to attract the 5% ‘bonus’, you need to make an additional voluntary repayment of $500 or more. You can make voluntary repayments at any time to reduce the balance of your debt. This is because your other form of debt is likely to have an interest rate higher than the HECS indexation rate. Thank you for reading my blog post on what is HECS and whether you should pay down your HECS early. The voluntary repayment bonus was initially set at 15%, reduced to 10% in 2005 and reduced again to 5% from 1 January 2012. Can I pay off my HECS / HELP debt sooner? 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 … How does the compulsory HECS repayment actually work? For the 2020-21 income year, the compulsory repayment … This is because you may be able to earn more than how much you will save by paying off your HECS early. On Monday, the Hecs (Higher Education Contribution Scheme) repayment threshold fell by more than 11%. For 2020, it is 1.8%. You can also make voluntary repayments. Voluntary repayments are in addition to compulsory repayments/overseas levy and are not refundable. This will benefit your personal finances better as you will pay less interest in the future. For tailored advice, you will need to speak to your trusted tax advisor. The compulsory repayment threshold is adjusted each year. For 2020-2021, the minimum threshold amount is $46,620. 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. For the 2017/2018 threshold rates visit ATO Hecs Repayment Thresholds and Rates. This process is similar to other forms of debt such as credit cards, just at a lower rate. On checking my ATO online account I can see that $805 has been credited to my HECS debt as my “compulsory repayment credit”. 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). That is, once your taxable income reaches a certain level. How can you check your HECS repayment debt? To make your loan repayments for 2019-20, the threshold is set at $45,881. You should also consider seeking independent legal, financial, taxation or other advice from a licenced adviser that relates to your unique circumstances. HECs (Higher Education Contri… However, if you are simply making purchases on impulses, it will be better to pay down your HECS debt. This means your account will be credited with an additional 5 per cent of the value of your payment. As a blog, it should not be taken as a substitute for professional advice from a trusted financial adviser. Another question you may ask is whether you should make voluntary HECS repayments. Repaying you HECS-HELP debt commences once your Help Repayment Income (HRI) is above the minimum repayment threshold for compulsory repayment. Firstly, bear in mind that HECS is a special kind of loan from the government. If you are debt free, investing or saving can be a good option, Ms Browne adds. 2017 changes Changes to funding of universities and the HECS were made as part of the 2017 Australian federal budget. With voluntary payment, you are allowed to make payments voluntarily at any time, to reduce the loan balance. How does the Compulsory HECS Repayment Actually Work? Can I pay off my debt sooner? The change to the voluntary repayment bonus will apply to all HELP debts. Click here to read my blog post on why you should have an emergency fund. 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 discount for voluntary repayments of a pre-2005 HECS debt was reduced from 15% to 10% from 1 January 2005. The amount of the bonus is an additional credit against the student’s outstanding HELP debt. People who have a HELP debt and make a voluntary repayment of $500 or more towards that debt currently receive a bonus of 5 per cent. Repayment income. Once you earn over this threshold, you will need to make a repayment, depending on how much you earn. The amount you must repay is set as a percentage of repayment income. HECS repayment occurs once you are over the repayment income threshold. I will now explain each factor in detail. From January 1, 2017, the Australian government will remove the HECS-HELP discount of 10% for eligible students who pay their contributions upfront as well as the voluntary HELP repayment bonus of 5%. 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 amount changes every year, depending on what the inflation rate is. Then, you would be better able to meet your other obligations like rent and utilities if times become tough. Voluntary HECS repayment. "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. You can find more information via the ATO website. Seek a qualified tax professional on more information that is tailored towards your financial circumstances. 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%. Make a repayment arrangement with the ATO. It does not take into account your personal circumstances. However, you only need to make compulsory HECS repayments if you earn more than the repayment income. Call the ATO’s individual tax self-help line on 13 72 26 and make an arrangement to pay. You should consider whether the information applies to you and your individual needs. I know I can use ~$2000 of my refund to make a voluntary repayment to cover the rest, but this just seemed odd to me. If you do earn over the repayment threshold you will have to start paying your HECS-HELP loan in the form of compulsory repayments or an overseas levy. They include: You may still be required to repay your HECS, on top of additional requirements. The removal of the upfront discount will affect students who can afford to pay upfront and choose to do so. 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! It will not affect students who fund their university studies through a HECS-HELP deferred loan. This also applies if your repayment … 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. On 1 January 2012, the voluntary repayment discount was reduced to 5%, and was removed completely from 1 January 2017. 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. How does this work if I was below the $43,151 threshold and I had no reportable fringe benefits? Your repayment income is the sum of the below amounts: The ATO calculator can help you calculate your repayment amount. If you never pay off your HECS, this interest amount will continue to compound. 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. This 5% bonus currently applies to voluntary HECS/HELP repayments of $500 or more. What is the interest/indexation rate for HECS? Your payslip may not necessarily show the amount of tax allocated to the HECS repayment amount. Not anymore. In 1995, the Government introduced a bonus for voluntary repayment ($500 or more) of HECS debt. If you are one of many people who graduated university with a HELP (Higher Education Loan Program) debt, you might not be sure exactly what the steps are to repay help debt. The compulsory repayment threshold is different each year. Make sure to notify your employer if you do have a HECS loan. Do you have any personal goals such as to be debt-free. HECS is a loan, and the timing and manner of a voluntary repayment is a financial decision based on your circumstances. Instead, you will pay back the amount as compulsory repayments when you start earning over the repayment income threshold. Below is a flow diagram on some of the factors you can consider when deciding whether to make voluntary HECS repayments. 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. Otherwise, you may be hit with a huge tax bill during tax time. What are the Compulsory HECS Repayment Rates? Disclaimer: This flowchart is not exhaustive but only for general educative purposes. a voluntary 2 per cent rate of repayment when income reaches $20000 (this would attract a 10 per cent discount on the total HECS debt) a 15 per cent discount for voluntary repayments of … Whether you should make voluntary HECS repayments depends on your financial circumstances. How can you Check your HECS Repayment Debt? Jason is passionate in helping young Australians manage their personal finances. Information for students about government assistance for financing tertiary study. This means your debt amount will grow slowly to align with the general rise in prices of goods and services. The minimum HRI threshold to make a loan repayment for 2019-20 is $45,881. This is then so you can meet you future need requirements! “From January 2017, discounts on up-front contributions to the education provider and voluntary payments of $500 or more to HELP debt were discontinued.” Disclaimer: This blog is not meant to be tax advice but rather general and educational in nature. Example: Barry has a debt of $4,500 and makes a $1,500 voluntary repayment, reducing his total debt to $3,000. Depending on your financial circumstances, it may be better to make voluntary HECS repayments. As shown in the above diagram, there are many factors you may consider whether to make HECS repayments voluntarily. When you notify your employer you have HECS, extra tax is usually taken out of your payslip. 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. By the end of your student life, you’ll have uploaded a photo onto social media of you in your graduation gown, ready to take on the world. The amount of the discount is paid by the Government to the student’s higher education provider. Usually, it is best to pay down other forms of debt first before making voluntary HECS repayments. 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. From now on, anybody earning over $45,881 … 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. I was entitled to a tax refund, yet the ATO still took part of that refund and applied it to my HECS debt? Until December 31, 2016, if you make a voluntary … If you make a voluntary repayment of $500 or more, you will receive a bonus of 5 per cent. "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. 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. You will need to click onto the ATO page, then click on loan accounts as shown below. 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. From 1 January 2017, the government will remove the 5% voluntary repayment bonus for HECS/HELP loans. 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