Self-imposed exile won’t HELP you avoid HECS Repayments
20/03/2017 Rachel Williams, Director of Accounting
Since its inception in 1989 the Higher Education Loan Program (HELP – also known as HECS pre 2005) has become an integral part of the Australian higher education system.
It has allowed many young graduates to work for a few years and accumulate some cash post-study without the burden of repaying their debt until their earnings reached a certain threshold. This system of government-funded, interest free “loans” has also enabled many young Australians to earn enough money to travel to see the world and work overseas – with the added perk being able to put their HELP debt repayments on hold indefinitely.
You see, overseas earnings were never counted toward the repayment income levels – so if you ran away and never came home, you never had to pay the loans back. That is until the 2015 Federal Budget flagged the loophole and marked changes to come in from 1 July 2017.
With student debts expected to hit $70.4 billion by 2018, the Australian government was looking for ways to stop this self-imposed exile of young university graduates who were avoiding their debt. Their solution? From 1 July 2017, those with a study debt who move – or are already living – overseas, will now need to make repayments on their HELP debts based on their income – wherever in the world it is earned.
What does this mean for me?
From 1 July 2017, repayments against your HELP debts will be based on your worldwide income for the 2016/17 income year. So if you live and work overseas and earn any type of income (including Australian and foreign sourced income) that exceeds the minimum HELP repayment thresholds, you will be required to make repayments against your loan.
What is the repayment threshold?
The repayment threshold is AUD$54,869 for the 2017 income year.
If you earn above this amount you have to make an overseas levy repayment.
The ATO has provided guidance on how to convert your foreign sourced income into AUD, which will help you calculate whether or not your earnings are above the threshold.
I am going overseas. What do I need to do?
If you are going overseas for 183 days or more, in any 12 month period, you will need to let the ATO know within seven days of leaving Australia. This is cumulative and does not have to be all at the same time.
You can notify the ATO through your myGov account. If you don’t already have an account, visit the ATO’s overseas obligations webpage for details on creating your myGov account.
I’m already living overseas. Do I need to do anything?
Yes. If you have a HELP debt, then from 1 July 2017 you will be required to report your worldwide income to the ATO. If your 2016/17 worldwide income exceeds the minimum repayment threshold, the ATO will raise a compulsory repayment known as an overseas levy.
How do I declare my worldwide income?
You can engage an Australian tax agent, like The Hopkins Group, to submit your worldwide income on your behalf. Alternatively, you can do it yourself through myGov.
If you choose to lodge yourself through myGov, then your declaration will be due by 31 October each year. Should you engage an agent, like The Hopkins Group, then the due date will be extended to the date usually afforded to tax agents (usually 15 May of the following year).
When calculating your income, there are currently three income assessment methods available.
What if my worldwide income is below the minimum repayment threshold?
For the 2017 income year, if you are a non-resident for tax purposes and your worldwide income is at or below AUD$13,717 then you simply need to submit a non-lodgment advice to the ATO and there will be no HELP repayment consequences.
If your worldwide income is above AUD$13,717 but below AUD$54,869, you will need to declare your income to the ATO. However no overseas levy will be raised as you’re below the minimum repayment level.
As the saying goes – all good things must come to an end. Come 1 July, there’s no running away from your HELP debt repayment obligations. If you have any further questions about what this might mean for you or if you would like to discuss anything else related to your HELP debt and/or tax matters generally, please do not hesitate to contact us and speak with one of our accountants today.
General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.
Get schooled on self-education deductions
17/05/2018 Bobbie Adams, Senior Accountant
Looking to up your professional development education game? You might be able to claim these expenses at tax time!
Deep dive into the Federal Budget with The Hopkins Group
09/05/2018 The Hopkins Group
We dipped our toes in the water of the Federal Budget last night, but now that the seas have settled, we’re ready to deep dive into the proposals and translate what it means for you.
Changes to GST on property transactions
06/04/2018 Rachel Williams, Director of Accounting
Thinking about property development? Our Director of Accounting breaks down the importance of considering GST and tax obligations from the outset.