Tax time - 5% Discount for prepayment of HELP loan prior to submission.

Lpascher on 29/07/2016 - 13:46
Last edited 29/07/2016 - 15:42 by 1 other user

Sorry guys. Long time time lurker here.

This "deal" is about to close and while I thought about posting it on the main feed I feel it is better placed here.

"The HECS-HELP discount will be removed from 1 January 2017. Until that date, the current arrangements still apply for units of study that have a census date on or before 31 December 2016."

I am just about to pay my tax for the year, but noticed the amount of help loan repayment was in the order of about 10,000.

As such this was the final amount and while I was happy to pay this off finally I remembered there was a scheme that allows for a 5% discount if this is paid prior to lodgement.

Basically the same as this.

http://studyassist.gov.au/sites/studyassist/helppayingmyfees…

Basically money for free and about 447 dollars for free just by pre paying a couple of days earlier.

You can find the details in your my gov link under the new my tax system or whatever.

Can not link to this for obvious reasons.

Again, I am in a unique circumstance and very lucky to have this as my final amount but this loop hole will be closed end of this colander year.

Hopefully it can make a couple of you out there think about saving 5%. Notably though if you don't have the free capital or have it working better for you, the current interest rate is pegged to inflation or around 1.5%. So almost better to keep it this way.

As I was going to pay off the amount it makes no difference in my circumstance. Well only about 500 dollars difference. Guess that edumacation is paying off for me.

Best of luck to all at tax time.

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  bemybubble on 29/07/2016 - 14:19

  +2

  Can I just say that personally the only benefit in this is if you know your next tax return is going to wipe off your HECS debt anyway, pay it upfront and get 5% off, then lodge your return…

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    pascher on 29/07/2016 - 14:50

    Yes, indeed. A very unique circumstance firstly, but also if anyone is edging close to the known fact that either for this past years submission this will be the case or likely in the current year, it would be prudent to pay this either prior to lodgement or by the end of the year - when the loophole closes.

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  benwaffle on 29/07/2016 - 16:26

  I know a few people who make this final voluntary HECS-HELP payment on their credit cards and then set up a 0% balance transfer to a new card so they have an extra 18-24 months to offset mortgages/earn interest/invest with their capital. Time value of money I guess…

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  Mad Max on 29/07/2016 - 18:32

  If they remove the incentive of paying your debt earlier nobody will any more and they will just pay the minimum. The interest on the loan is pegged to inflation (1.5%) so you can get more money from an online savings account.

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    pascher on 30/07/2016 - 09:58

    Maxi. I agree completely with you.

    But if you knew you were to pay it off in this past financial year or even next it would be of greater net benefit to do this and pre pay while the incentive exists.

    Again. This is only valid if you are close to paying off your debt.

    Have the ability to get the free capital to shift around. And don't mind waiting the week extra for the return.

    In my case it is a approx 500 dollar savings on a final amount of around 10k.

    This is for doing nothing but gaming the system and volunteering to pre pay three days before I submit my return anyway.

    But it totally agree with you. The government is crazy to not get the money back asap.

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      Mad Max on 30/07/2016 - 14:47

      Sure you should take advantage of the incentive while it is there.
      My comment related to the future of HECS-HELP. It will much more beneficial to accumulate the debt and pay it as slow as possible.
      It seems unreasonable to remove an incentive to pay it earlier.
      Especially considering that if people move overseas the government may never recover the debt.

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        pascher on 03/08/2016 - 07:56

        Totally agree.

        There used to be a caveat surrounding people that would remain citizens but be out of the country and not residents for tax purposes.

        (10 years)

        This was a very small and unique loophole.

        It basically the government giving up on bad debts.

        This has been scraped as it was bad account keeping and basically lazy.

        Then Again, a progressive Australian government looking to balance the budget is still going to be some time off.

        Adjusting my return now the pre payment has worked.

        I cringe for future generations burdened with debt now. It has taken me about 15 years from starting study to pay it all off.