Higher Education Loan Program (HELP) debt repayment thresholds changed on July 1, making this a good time for a quick refresher on your obligations regarding higher education financial assistance schemes.
Students with a HELP loan are required to start repaying their debt once their income reaches the minimum repayment threshold (see new table below). As their employer, you have a legal responsibility to withhold the appropriate amount under Pay-As-You-Go (PAYG) taxation. Failure to withhold an appropriate amount can result in a penalty from the ATO, of an amount equal to what you should have withheld for your employee in the first place.
The first thing to do when hiring a new employee is to get the employee to complete a Tax File Number Declaration Form. The form will require the employee to declare whether they have HELP debt and will help you determine the amount that will need to be withheld from payments made by you. If you’re unsure how much you need to withhold, we can help – just call us on 9887 8751 or send us an email.
Your compulsory repayment rate increases as your income increases (see table below). The more you earn, the higher your repayment. Your compulsory repayment is based on your income alone – not the income of your parents or spouse.
You must advise your employer if you have a study or training support loan. Under the PAYG withholding system, your employer will withhold an amount from your income to cover your compulsory repayment.
Advise your employer by ticking the relevant box on one of the following forms that applies to your situation:
- If you’re starting a new job, complete a Tax file number declaration (NAT 3092) and include your debt details at Question 11.
- If you are already working and being paid, complete a Withholding declaration (NAT 3093) and include your debt details at Question 6.
- When you pay off your loan in full, complete a new Withholding declaration (NAT 3093) to advise you no longer have a debt. Update your debt details at Question 6.
Note that if you are making PAYG instalments (if you earn business or investment income), the ATO takes your debt into account when working out your PAYG instalment amount and rate. You can vary your instalment amount or rate to allow for your personal circumstances.
If you’re ahead of the game, voluntary repayments can be made at any time to reduce the balance of your debt.
New Higher Education Repayment Thresholds
* RI = 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.
Looking for more detailed advice relating to your HELP Debt obligations? Email us or call us on 9887 8751 for an appointment.