What You Need to Know About Repaying HELP Financing
If you participate in the Higher Education Loan Program (HELP) to assist in financing your education, you must start to repay the debt once your income exceeds a government-set repayment threshold for the income tax year, even if you are still in school.
There are actually two ways in which you can pay your student contribution under the HELP scheme:
Make a full or partial up-front payment to the university. For a full up-front contribution you only need to pay 90 percent of the total; the Government pays the remaining 10 percent to the educational institution you are attending. Even partial contribution payments of $500 or more are eligible for the 10 percent discount.
Repay the government through the tax system if the government has paid your contribution under the HELP scheme. HELP debts are collectable through the pay as you go (PAYG) system. Have the government pay the contribution (or the balance if you made a partial up-front payment) and agree to repay the government through the tax system.
If you choose the second method, you start repaying when your repayment income exceeds that threshold, which changes annually. Repayment income is the sum of your taxable income, net investment losses, fringe benefits, exempt foreign employment income and superannuation contributions.
The Australian Tax Office (ATO) calculates your compulsory repayment for the income year in question and includes the amount on your notice of assessment. If you are a student, you must let your employer or other payer know that you have an accumulated HELP debt, either on a Tax File Number declaration or on a Withholding declaration.
Whoever is paying you must start to withhold additional amounts from your pay once your earnings reach a statutory amount, which is revised annually. The additional withholdings are to cover any compulsory repayments.
These amounts go into the total tax withheld shown on your annual PAYG payment summary. The compulsory repayment will be calculated when your income tax return for the year is processed. If there was not enough money withheld during the year, the amount to be repaid will show on your income tax notice of assessment.
If you made any voluntary repayments of $500 or more, you will receive a bonus on the compulsory repayment amount.
While there is no real interest charged on HELP loans, your debt is indexed each year to reflect changes in the Consumer Price Index. The ATO makes this adjustment on June 1 each year and applies it to the portion of your debt that has been unpaid for 11 months or more.
Before applying for a HELP loan, consult with us on (02) 9954 3843 to help ensure you are clear on how they work and that they are suitable for your current and anticipated financial situation.