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HECS Repayment

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Hi there,

 

In November 2017 I got a pay raise which took me over the threshold for compulsary HECS payments. Every month since (including November) my employer has taken out an extra 4% of my taxable income for HECS payments as required. 

 

The problem is now that it's tax time the ATO is saying that I owe them money because the 4% of my taxable income for HECS payment is being calculated for the whole financial year instead of 4% of my taxable income from November 2017 - June 2018. 

 

Does anyone know if this is the correct process?

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Hi @Lorenzo,

 

That's right. HECS/HELP repayments etc are not progressive like regular income tax. The percentage is calculated across your whole income, not just the bit over the threshold. (You can see the 2017–18 HELP repayment thresholds here.)

 

  • If your 2017–18 salary were $55,873 you would pay nothing.
  • If your salary were $1 higher, you would tip into the 4% repayment bucket. 4% × $55,874 = $2,235.

 

It is a bit annoying. The way I think of it is that the money isn't extra tax; it's paying down your HECS debt, which you will have to pay back eventually. So in the second example, you would have $2,235 less HECS debt to repay next year... plus being in a higher threshold means you're earning more, which is usually a pretty good thing  Smiley Happy

1 REPLY 1

Best answer

ATO Certified

Initiate

Replies 0

Hi @Lorenzo,

 

That's right. HECS/HELP repayments etc are not progressive like regular income tax. The percentage is calculated across your whole income, not just the bit over the threshold. (You can see the 2017–18 HELP repayment thresholds here.)

 

  • If your 2017–18 salary were $55,873 you would pay nothing.
  • If your salary were $1 higher, you would tip into the 4% repayment bucket. 4% × $55,874 = $2,235.

 

It is a bit annoying. The way I think of it is that the money isn't extra tax; it's paying down your HECS debt, which you will have to pay back eventually. So in the second example, you would have $2,235 less HECS debt to repay next year... plus being in a higher threshold means you're earning more, which is usually a pretty good thing  Smiley Happy

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