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Re: Salary sacrificing with a HECS Debt

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Replies 3

Hi there,

I just have a question regarding Salary Sacrificing (preferably my rent) whilst still repaying my HECS debt. Last year was the first year I begin repaying the debt, and I was able to still get a small tax refund. I am wondering how to go about salary sacrificing with a HECS debt, while avoiding a tax bill at the end of the financial year? Also, is it worth salary sacrificing when I will have to pay extra each pay towards my HECS debt, or would I end up with a similar pay check at the end of the week? I work a government position, permanent part time at the moment.

Thank you very much!
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Most helpful response

ATO Certified Response

Former Community Support

Replies 1

Hi @Daisy124,

 

Thanks for your question!

 

@macfanboy has provided some great information, but I just wanted to clarify one point.

 

In most salary sacrifice situations, employers do not take your HELP debt into consideration (as in their eyes, your salary is now below the relevent threshold), and this usually gives rise to a tax debt at the end of the financial year.

 

If you do proceed with the salary sacrifice arrangement, I'd strongly suggest working out your HELP repayment component manually based on your repayment income threshold and asking your employer to withhold that specific amount from each pay as an upwards variation. You can find out more about upwards variations here.

 

This likely going to be the safest way to ensure that you do not have a tax debt, as your HELP repayment will be covered. Ultimately, you'll likely still be paying less tax overall but you'd need to work out the benefits of setting up a salary sacrifice agreement yourself, bearing this information in mind.

 

Hope this helps,

 

Rachael B.

3 REPLIES 3

Taxicorn

Replies 0

@Daisy124 

 

The obligation to repay the HECS debt will remain regardless of you salary sacrificing or not.

 

The amount that you repay your HECS debt will be the same.

 

If you salary sacrifice you will pay less tax and pocket more money.

 

 

Most helpful response

ATO Certified Response

Former Community Support

Replies 1

Hi @Daisy124,

 

Thanks for your question!

 

@macfanboy has provided some great information, but I just wanted to clarify one point.

 

In most salary sacrifice situations, employers do not take your HELP debt into consideration (as in their eyes, your salary is now below the relevent threshold), and this usually gives rise to a tax debt at the end of the financial year.

 

If you do proceed with the salary sacrifice arrangement, I'd strongly suggest working out your HELP repayment component manually based on your repayment income threshold and asking your employer to withhold that specific amount from each pay as an upwards variation. You can find out more about upwards variations here.

 

This likely going to be the safest way to ensure that you do not have a tax debt, as your HELP repayment will be covered. Ultimately, you'll likely still be paying less tax overall but you'd need to work out the benefits of setting up a salary sacrifice agreement yourself, bearing this information in mind.

 

Hope this helps,

 

Rachael B.

Taxicorn

Replies 0

@RachaelB 

 

Thanks for the correction.