Hecs
- Thread starter magic
- Start date
Hi Magic,
The 'HECS' that is deducted from your pay is just extra tax withheld from your salary (& it is grouped in with the rest of the tax withheld) - the actual paying down of the HECS debt doesn't occur until your tax return is processed by the ATO. The amount that is paid off your HECS debt will depend on what your income is (made up of taxable income add rental losses, reportable fringe benefits & reportable super cont).
You can of course make lump sum repayments in addition to this but not through your tax return.
The 'HECS' that is deducted from your pay is just extra tax withheld from your salary (& it is grouped in with the rest of the tax withheld) - the actual paying down of the HECS debt doesn't occur until your tax return is processed by the ATO. The amount that is paid off your HECS debt will depend on what your income is (made up of taxable income add rental losses, reportable fringe benefits & reportable super cont).
You can of course make lump sum repayments in addition to this but not through your tax return.
For 2014 + voluntary repayments of HELP (The modern name for HECS) don't attract a discount any more.
The rate of interest will increase from 2016 when the new fee arrangements commence. It used to be based on inflation and was very low. Now its tied to the 10 year bond rate...Capped at 6%.
http://www.smh.com.au/national/educ...ndex-slug-former-students-20140522-zrks7.html
The rate of interest will increase from 2016 when the new fee arrangements commence. It used to be based on inflation and was very low. Now its tied to the 10 year bond rate...Capped at 6%.
http://www.smh.com.au/national/educ...ndex-slug-former-students-20140522-zrks7.html
The only reason to pay it back as a lump sum would be you either had no other borrowings such as PPOR or investment loans, car loans etc or you wished to increase your borrowing capacity when approaching a lender, as repaying the hecs debt marginally increases your income available to service a home loan.
A word of warning about voluntary repayments....If a VR is made say in early July and then the taxpayer lodges the return in early August one of two scenario's will occur:
1. If the total HELP (Higher Education Loan Payment) debt is equal to, or less than, the annual repayment then this just bring forward the cash outgoing. In other words, the first repayment will clear the debt and so on assessment no extra is deducted. This is the old "discount HELP strategy. It tended to work well for those doing self-education while working etc. Each year the fees build and a repaid by that years repayment. The bring forward used to attract a discount ie 10%.
2. Otherwise bringing a repayment fwd is futile and would result in two repayments. This brings the debt down but since the rate of indexation is so low this seems a poor decision if the taxpayer has ANY other loans. The extra capital repays would be better against a credit card.
This year the ATO aren't sending taxpayers their HELP balance ! Its not even available in etax now. In 2013 you could download the balance as a prefill and the estimate included the repayment. Tax agents can access it...Or you have to phone the tax office and ask. Strangely, e-tax just provides the guidance that the ATO will calculate it and it will be shown on the Assessment. My wife's return had that issue in etax and frankly I thought it a problem..... I had to register as agent then check the balance. Not a helpful change.
1. If the total HELP (Higher Education Loan Payment) debt is equal to, or less than, the annual repayment then this just bring forward the cash outgoing. In other words, the first repayment will clear the debt and so on assessment no extra is deducted. This is the old "discount HELP strategy. It tended to work well for those doing self-education while working etc. Each year the fees build and a repaid by that years repayment. The bring forward used to attract a discount ie 10%.
2. Otherwise bringing a repayment fwd is futile and would result in two repayments. This brings the debt down but since the rate of indexation is so low this seems a poor decision if the taxpayer has ANY other loans. The extra capital repays would be better against a credit card.
This year the ATO aren't sending taxpayers their HELP balance ! Its not even available in etax now. In 2013 you could download the balance as a prefill and the estimate included the repayment. Tax agents can access it...Or you have to phone the tax office and ask. Strangely, e-tax just provides the guidance that the ATO will calculate it and it will be shown on the Assessment. My wife's return had that issue in etax and frankly I thought it a problem..... I had to register as agent then check the balance. Not a helpful change.
