Listening to the Money Cafe, they indicate for anyone with a HECS debt, the amount will go up by inflation on 1 JUNE 2023.
The amount increase only happens on that day, once a year.
This may be as much as 9%.
This rate is higher than your mortgage and some personal loans.
I believe this will reduce the tax/replayments you make when you tax is due in 3 months time..
It seems a no-brainer to pay as much as possible before 1 June, but get your own advice..
I have no HECS/HELP debt.
Make 9% Post Tax Saving in Interest before 1 JUNE 2023 on HECS
chami on 02/04/2023 - 17:53
Comments
the pros just never get a job which pay high enough to have to pay back hecs
how many part time sales assistants or bar staff who have a masters degree in ancient Egypt earn more than 47k
Too bad the HECS/HELP still exists when you die and it will be taken out of your estate.
dont care….dead
also $0 x hecs debt = $0, the pros dont want you to know that either
It looks like it gets cancelled when you die.
A deceased person will only make any compulsory HELP repayments for the period before their death. A trustee or executor will need to make these compulsory repayments.
The rest of the HELP debt is cancelled upon their death."
https://studyassist.gov.au/paying-back-your-loan/loan-repaym….
I am going to stick my neck out here and say that a 9% indexation rate is very unlikely for 2023.
If the indexation rate was going to be 9% for 2023, the CPI would need to go up by 8.5% in the March 2023 quarter… or over the twelve months to the March 2023 quarter, the CPI would need to rise by 14.6%.
Considering CPI went up by 1.9% for the December 2022 quarter (and has been either 1.8% or 2.1% for the previous three quarters, and between 0.6% and 1.3% for the previous four quarters), plus I have not noticed any particularly dramatic price rises over the last three months in the goods and services I buy, I would be surprised if there is such a dramatic spike in CPI over the last three months.
Assuming the CPI increase over the March 2023 quarter was actually similar to previous quarters (e.g. 1.8%), the indexation rate would actually be around 7.2%.
I guess we will see who is right when the March 2023 quarter CPI numbers are announced towards the end of this month!
Seconded, and if you look at the monthly CPI figures, it's been trending downwards since Dec 2022. Nothing better than getting data from the source, https://www.abs.gov.au/statistics/economy/price-indexes-and-…
… and there’s nothing better than looking at the relevant legislation (Division 140) to see the formula for calculating the indexation rate!
The calculation of the indexation rate was rather mysterious to me until I bothered to look at the relevant legislation about an hour ago.
An example of how the hecs indexation is calculated can be found here. There are two sums to calculate
Numerator sum = 126.1 + 128.4 + 130.8 + x = 385.3
Denominator sum = 483.7Where x is the unknown All Groups March CPI.
If we had no inflation from last quarter, x = last quarter = 130.8
So the indexation would be ((385.3 + 130.8)/483.7 - 1) x 100% = ( 516.1 / 483.7 - 1) x 100% = 6.7%
If prices went up from last quarter, the indexation would be higher than 6.7%
So your figure checks out
@avoidfullprice: Maybe they were talking about pre-tax dollars as well.. 6% including 1/3 tax would be 9%.
@avoidfullprice, Thanks for that calculation. It will a also reduce you ATO bill for the 22/23 year.It is hard to save 6.7 % over a short period on a set day over a day later.
It may be useful information for some..Maybe they were talking about pre-tax dollars as well.. 6% including 1/3 tax would be 9%.
I am confused.
The study / training loan component of your tax repayment is calculated based on a specific definition of pre-tax income (called repayment income1), and is calculated independently from other tax components (e.g. Income Tax, Medicare Levy, Medicare Levy Surcharge component). This component is essentially what is withheld from your take-home pay (assuming you earn income where tax is withheld), so the Income Tax component (as an example) will not change if my study / training loan component for FY23 is $0 or $10,000.
For example, if my repayment income for FY23 is $100,000, then my compulsory repayment will be 7% of that (i.e. $7,000), so my take-home pay would have gone down by $7,000 across the entire FY23.
It will a also reduce you ATO bill for the 22/23 year.
That is only true if the study / training loan balance before submitting your FY23 tax return is less than the compulsory repayment amount for FY23.
If we continue my previous example, imagine I had $20,000 left on my study / training loan account. If I decided after seeing your forum post that I will voluntarily pay off all $20,000 before 01 June 2023, when I file my FY23 tax return, I would have the $7,000 originally compulsorily withheld from me actually transferred to my tax account as a credit, which means that I would probably have a tax refund for FY23.
However, if I instead chose to only voluntarily pay off $10,000 before 01 June 2023, I would have $10,720 left to pay off on 01 June 2023 (assuming a 7.2% indexation rate for 2023, as predicted earlier). When I submit my FY23 tax return, I would have the $7,000 compulsory repayment credited to my study / training loan balance, leaving me with $3,720 left. Keep in mind that I said before the Income Tax component and Medicare Levy component and Medicare Levy Surcharge component (to name a few examples) are not affected by any voluntary study / training loan repayments, so in spite of what you said before, my $10,000 voluntary repayment would not result in any reduction of my tax bill for FY23 whatsoever.
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Repayment income is taxable income, plus any total net investment loss (which includes net rental losses), total reportable fringe benefits amounts, reportable super contributions and exempt foreign employment income. ↩
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I wouldnt listen too much to Kirby.
Your HECS debt is cancelled when you die. No point paying it off, just pay the mimumum required. Food for thought.
"A deceased person will only make any compulsory HELP repayments for the period before their death. A trustee or executor will need to make these compulsory repayments.
The rest of the HELP debt is cancelled upon their death."
https://www.studyassist.gov.au/paying-back-your-loan/loan-re…
*The above is true depending on how long youre planning on working and when you start your HECS debt
Good point, but imagine not earning enough through your lifetime to pay off something as small as a bit of HECS debt 💀
In 2022 indexation was 3.9%, 2021 was 0.6% and prior to that hovered in the 1.X%
This year being 9%, imo will be unlikely but I would assume it would prob be close to 6%
I have 40k HECS and I haven't paid back a cent due to my income. Uni's shouldn't be a damn business.
Uni's shouldn't be a damn business.
Tell that to the people who cut their funding and expected them to produce the same output
Uni's shouldn't be a damn business.
Lol damn right, they should all work for free.
I have 40k HECS and I haven't paid back a cent due to my income.
Looks like your uni degree really paid off then.
Ive always worried about it but there's push for some sectors to have their debt wiped.
Just this week, the government was asked during question time why the wiping of student debt wasnt on their radar. Chalmers of course just stated that people paying a co contribution is a good system.
I dont want to pay mine off, only to find the current offerings for teachers is expanded.
Then they'd have to offer something to the people who already paid their debt off.
No they wouldn't.
Another round of petitions heading to the government. This will become an issue on the basis of gendered pay gap with women carrying some of the longest debts due to child rearing career breaks and unable to pay debts off before retirement.
It would be a stupid party to try and spin billions on subs and billions on future housing but not think 30+ years of study debt a problem.
HECS is a broken system.
HECS is a broken system.
If your job prospects are so poor after doing whatever course you have chosen, that you can't pay off a $30k or so debt easily, then you've made a bad choice. Why should other subside your poor decision making? This is also ignoring that the course you have done was likely subsidised in part by the taxpayer already
@brendanm: By that measure, no necessary roles would exist, ever.
One of the many reasons why people are leaving teaching - Secondary teaching degrees in anything not Science are now $40k+. Salary cap for life in the classroom - $100-110k (depending on state and if you can achieve tier 9/10 ranking).
Most teachers need to have post graduate qualifications.
And we wonder why teachers are bailing when their qualifications could reap twice or triple the pay elsewhere?
@brendanm: That's not what I said. What I said was teachers hit a lifetime salary cap (which isn't real - Tier 9 pay rates are virtually unachievable for many teachers), so they cap out in the 90's somewhere. Forever.
To get to that, it could take a teacher 20 years. Myself, I've only hit pay band 3 after 6 years.
For many, any HECS payment they make is simply wiped off come indexation. Then add in time off for kids (in what are female dominated professions) and you can see how some people aren't paying off their debt until they're 60.
I can understand why teaching, nursing, aged care etc are not sectors people are flocking to. If I had my time again, I wouldn't have bothered.
If I had my time again, I wouldn't have bothered.
Why did you do it then? Everyone knows this about teachers pay, it isn't a surprise.
People on far lower wages are able to pay off a car loan of a similar amount, why can't people pay a HECS debt, something which helped them earn above above wages. Yes, even though teachers have capped max pay, it is still way above the national median pay, and even above the mean national pay.
why the wiping of student debt wasnt on their radar. Chalmers of course just stated that people paying a co contribution is a good system.
Why should all taxpayers pay for the choices of others?
Lol
HexAdmittedly i cleared it.
I feel sorry for the future generations who have to pay for uni and exorbitant house prices.
Boomers really know how to screw over future generations.Yep, us Boomers had it easy.
One old car per families, no washing machine, no air-conditioning, no computer, no mobile phone, maybe one small TV. one fridge.
Even the small things, no fan, no toaster, slow kettle. No internet. No underground sewage in many areas.
This must have items all costs money for GenX
Mortgage rate fix at 12%.
44-hour/5.5 day working week. No maternity leave/ little sick leave. No medicare, No NDIS
The big one: National Service for 3 or 6 month and following 5 years at minimum pay."Any you try to tell the kids of today that" - Monty Python
No 10% for Super, No GST, No medicare levy, probably where the extra cash for houses came in.. but top tax rate was 70%.
Your house was 10x less to buy than what the equivalent is today.
I can assure you the gen y/x/z's arent driving new cars because theyre too busy trying to save for a deposit.
Free university is the equivalent of handing every student a $40k cheque for studying, we never received that.
Oh and there's stuff all first home buyers grants left anyway because investors have pushed prices out of what was once considered an affordable entry point
The X and Y gens also get smashed with the medicare and private health insurance loading so the pensioners and boomers get access to cheaper medication/insurance premiums.
Free uni was only from 1974, mainly after the boomers' time.
Before that only the 'elite' could afford it. There was still nursing and apprenticeship where you learnt on the job.
In US 1970 10% went to college/Uni but it is 37% now. Not sure about Australia.
The bottom line is there is not enough cheap housing (2X1) and everyone wants (needs?) to be in the cities.Yes - there are now too many old people. Covid should have done a better job :-)
Yep, us Boomers had it easy.
One old car per families, no washing machine, no air-conditioning, no computer, no mobile phone, maybe one small TV. one fridge.
Even the small things, no fan, no toaster, slow kettle. No internet. No underground sewage in many areas.Damn, my boomer parents must have been living it up according to this.
who gives a shit about HECS. let the gummit take it out of my salary for as long as they want
I felt like this until it was paid off fully, then I started getting quite large tax refunds which was a lovely surprise!
It seems a no-brainer to pay as much as possible before 1 June
For anyone with spare cash around it might make sense to pay down HECS, but remember it likely will come back down to that 2-3% range in the near future. You can't withdraw it back out next year when still paying 5% on a home loan.
Agreed, I have the money to pay mine off but would rather leave it on my home loan, As you say it'll likely be lower than home loan rates soon and at least on your mortgage you can still access it if you need
"In the near future".
Macquarie term deposit is 4.6% for 12 months so there will no reduction to 2% inflation anytime soon, unless there is a recession and then your idea on withdrawals will right on..
HECS is the best debt you can have. It's optional to pay back depending on your income and it only goes up by indexation.
It's not the worst advice to pay back if you have some extra cash but its a bit of a catch-22. If you're in the position where you can pay it back you're probably already doing fine/have already paid it off and it really doesn't matter.
The point being made is that we are in a situation where the indexation is likely to be higher than the interest rate on a typical home loan. I could be wrong, but I don't think this has happened before. It was always a given that HECS would be your cheapest debt and therefore not worth paying off. But that has now changed.
OP is actually saying: Paying of your HECS = flex
Only do this if you can pay the full amount off!!
Any payments made prior to the indexation do not count towards compulsory repayments.Compulsory repayments are calculated on your income, not your debt.
Exactly.
Not sure why someone negged me.Because reducing your overall debt before indexation reduces the amount of debt overall - albeit not majorly, but still worthwhile to avoid more indexation
@blueyez: Of course -
But OP states that “ I believe this will reduce the tax/replayments you make when you tax is due in 3 months time..” which is incorrect.
It does not reduce the repayments at all.
They should bring back the 10% upfront discount.
I'm thinking it's time to repay mine as I'm lucky enough to be in a position where I have extra cash in the bank. I'm earning 5% interest which is far lower than the CPI rate, this is on top of the tax which needs to be paid on the interest.
Anyone know if there are any CC which earn points on payment to the ATO (without fees)?
Sounds like I'm in a pretty similar situation to you. Keen to hear what you find out.
Any direct card payments to the ATO will incur a card surcharge, so that is unavoidable. Additionally, a lot of credit cards programs geared towards personal use (e.g. Westpac Altitude, ANZ Rewards, NAB Rewards) will not issue points on any direct spend at government-related entities, including the ATO.
One option worth considering is Beem It. This is a service where you can make BPAY payments from an Australian-issued credit or debit card, and the good news is that the ATO does not charge a fee for BPAY payments. I would suggest checking the comments sections of current and previous credit card deals to see whether people have recently reported whether Beem It payments earned points and did not incur a cash advance (and even counted towards credit card minimum spend criteria), but I cannot recall a credit card where this was not the case.
Beem will work but start now. Make a payment every 2-3 days IMO
Most cards have a surcharge for paying ATO, or they limit you on points earning rate.
There are some companies such as Sniip, pay and B2Bpay that allow you to earn full points rate.
Has anyone used Westpac Altitude Platinum Qantas Credit Card to pay ATO through BPAY via BEEM? Did it count towards the $4k minimum spend for the bonus points? It says in the terms and conditions it doesn’t include BPAY but I’ve done this on other cards and it shows up as “Beem it spend” on the account. So does the bank even know what the Beem it transaction was for?
How did you end up going with this Honeypot?
is there a time delay processing the payment and calculating the balance before indexation?
do you have to pay a week or two before June 1st or you can pay a couple day before it?If I have contributed 6k this year..
And I had 16k left in HECs debt,
Can I pay 10k? and I don't get charged interest?
Or do I have to pay the 16k upfront? and then wait for tax return to receive the 6k I contributed over the year? Thanks guys
You need to pay the $16k as it gets indexed on 1 June. Then when you do your taxes, you’d get the $6k back. Just make sure the payment hits the ATO before 1 June
thanks for the info!
To expand on El-Rhi, if you paid 10k (before June 1st), you would only be indexed on the 6k of your HECS debt remaining.
When you go do your taxes, the 6k that has been withheld throughout the year would still go towards paying off the remaining 6k. By default/minimum repayment, you'd most likely 'receive' some of the 6k back.In your situation, you may as well pay the 16k right now, and then you can get the 6k back in full at tax time.
Otherwise you will be paying approx $420 extra due to the 7% indexation on the remaining 6k debt.How about if I pay 9k in the above scenario? That would result in 7k owing prior to tax lodgement. Will I get the 6k HECS PAYG returned in my tax returned?
No, the 6k that your employer has held will go towards paying off the 7K remaining.
Same as above, you would receive a lot more of that 6k back than if you had 15k HECS remaining though.
This anomaly highlights how the cash rate is still too low and likely to continue to increase.
A loan indexed to CPI is supposed to be cheaper than a mortgage, and usually is.
Unless you can pay it off fully, and don't have any other loans, paying down your HECS is a poor financial decision.
You also miss out on the opportunity to invest that money somewhere else, such as dividend paying shares
i owe 35k in hecs debt should I pay it off if I have money now
How long does it take for ATO to accept funds?
Gift cards on sale in the morning, just wondering if they will process in time to avoid charge
Definitely not. You should have made your payment last week.
Bro if I had the cash to pay it off I would have :’)