HECS Debt Repayment for Residents and Non-Residents for Tax Purposes Australia

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In this blog we will discuss:

HECS Debts (aka HELP debts)
The HECS Debt Repayment threshold
HECS Debt Repayment Rates
How you can Check HECS Debt Balance
Indexation rates applied on your HECS debt
Non-residents and declaring Foreign Income for HECS debt repayments

As always, we at Worldwide Accountancy are here to assist you with all your accounting, taxes and finance needs including HECS Debts. Contact our specialist team for your Free Initial Consultation.

For this blog, the words HECS (Higher Education Contribution Scheme) and HELP (Higher Education Loan Program) are used interchangeably.

Your HECS debt is a loan from the Commonwealth of Australia to eligible students enrolled in eligible courses. If you are looking for more eligibility information, please see the Studyassist website.

HECS has been around since 1989, assisting countless students to access higher education. That being said, knowing how the government operates, they want their money back as soon as possible.

It’s almost impossible to avoid paying your HECS debt as the amount will be automatically levied on your income through the PAYG scheme and/or your individual tax return.

HECS Debt Repayment Threshold and HECS Debt Repayment rates

As with other sorts of taxes, the HECS debt repayment amount is marginal i.e. the more you earn, the higher your repayment will be.

The HECS Debt Repayment thresholds and rates are updated annually. For the 2021-22 tax year, the threshold is $47,014 AUD. Meaning if you earn below that figure, you do not have to pay any of your HECS debt.

The HECS Debt Repayment rates vary from 1% to 10% of your HECS Debt repayment income (see definition below). In 2021-22, the HECS Debt Repayment percentage for the lowest threshold between $47,014 – $54,282 is 1% whereas if your income was above $137,898 the rate is 10%. For demonstrative purposes, if you earn $137,898 p/a, you will have to pay 10% or $13,789 this is in addition to the $36k of income tax and $4.5k of Medicare and Medicare surcharge levies. That’s just under $55k for the year or 40% of your salary.

For more info on current, historical and future thresholds and rates, please see this page from the ATO website.

How to Check HECS Debt Balance?

Log into your MyGov account, link your ATO account and view it under the Tax tab
Visit the myhelpbalance.gov.au website
Contact us – as a client of ours we can provide you with this information

HECS Debt Repayment Income

HECS Repayment income (RI) is calculated as 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.

Rules around non-residents for tax purposes and their HECS Debts

If you have moved abroad and have a HECS debt, you will have the same repayment obligations as people who live in Australia. This means if your worldwide income is above the minimum repayment threshold for that particular tax year you are obliged to make compulsory repayments to the ATO. You must convert your foreign income into Australian dollars.

You then must advise the ATO of your worldwide income, and make compulsory repayments through the three main assessment methods below. Please see the ATO links or contact us for more information.

Please note, the ATO will continue to maintain your loan account. Your debt will not be waived and the amount outstanding will continue to be indexed each year until you have paid off your debt. You may also make voluntary repayments when abroad.

It’s important to look at this before you have multiple returns outstanding. With each outstanding return completed – you will have to declare the income earnt in the foreign jurisdiction you were living. Thus, requiring a (sometimes large) payment towards your HECS debt, in addition to any interest or penalties the ATO that will likely apply.

One issue here is because you converted your worldwide income to AUD, it may represent a much larger amount than you have disposable income after all your expenses abroad. Recently we had a client who had three years outstanding, because they were living in New York, their living costs were much higher than if they were back in Australia. Yet when their gross income was converted from USD to AUD, it was quite a large amount. This affected their ability to pay the HECS loan and a payment plan with the ATO had to be entered.

We offer a specific HECS Assistance service for non-residents which includes assessment, income declaration and repayment calculation. You can book it through our booking platform on our booking page.

Transferring money to Australia

In the scenario where you may need to transfer money to Australia from abroad – we recommend using Wise. You can utilise our affiliate link here.

HECS Loan Indexation

As mentioned above, your balance is levied with an indexation amount on 1 June each year. Indexation is applied to your debt to maintain its real value by adjusting it in line with changes in the cost of living. See the ATO website for current and past indexation rates.

HECS debt wiped after 5 years overseas?

We have got this question several times so thought we would address it. The ATO will NOT wipe your Debt after 5 years of being overseas. Your debt will continue as you reside overseas. If anything, it will continue to grow with indexation.