What are the benefits of packaging with a HECS/HELP debt?
You can benefit from salary packaging even if you have a HELP (Higher Education Loan Program) or HECS (Higher Education Contribution Scheme) debt. When you salary package, you are using money before it gets taxed. This could reduce your taxable income – and increase your disposable income.
How will my HECS/HELP debt impact my salary packaging?
If you have a HELP debt, you may need to adjust your HELP repayments when you salary package. This is because your HELP repayments are calculated based on your ‘HELP Repayment Income’ (HRI). In most cases, this will be your annual taxable income plus your total reportable fringe benefits amount shown on your PAYG Payment Summary.
Understanding your 'adjusted taxable income'
Although salary packaging can reduce your taxable income, it can increase the gross value of your salary. This is referred to as your 'adjusted taxable income'.
How your adjusted taxable income impacts HECS/HELP repayments
The ATO assesses you on your 'adjusted taxable income' when working out how much you should pay in HELP or HECS repayments.
Your adjusted taxable income equals your salary plus the gross value of your fringe benefits (e.g. $40,900 + $17,000 = $57,900).
Before you start...
Before you start salary packaging, please tell your payroll department to take additional HELP or HECS repayments from your salary.
You should seek financial advice if you're unsure.
Will my payroll department automatically adjust my HELP repayments once I start salary packaging?
No. You must advise your payroll department of the HELP debt repayments you need to make. While each employer is different, in most cases your payroll department will be able to help you manage the process and changing your HELP repayments is quite simple to do. Once you have completed the relevant paperwork, any additional HELP amounts should be deducted from your pay.
Can I salary package additional HECS/HELP debt repayments?
Yes you can. Additional HELP repayments can be salary packaged if you wish to pay your HECS/HELP debt off sooner.
Example:
Barry has a debt of $4,500 and makes a $1,500 voluntary repayment, reducing his total debt to $3,000.
Use our HECS/HELP calculator for salary packaging.
Contact us on 1300 123 123 to see how salary packaging could help you pay your HECS/HELP debt off sooner and increase your disposable income.
What are the current HELP repayment rates?
HECS/HELP repayment threshold and rates for 2020-21:
| HECS/HELP repayment income (HRI) | Repayment rate |
|---|---|
| Below $46,620 | Nil |
| $46,620 – $53,826 | 1% of HRI |
| $53,827 – $57,055 | 2.0% of HRI |
| $57,056 – $60,479 | 2.5% of HRI |
| $60,480 – $64,108 | 3.0% of HRI |
| $64,109 – $67,954 | 3.5% of HRI |
| $67,955 – $72,031 | 4.0% of HRI |
| $72,032 – $76,354 | 4.5% of HRI |
| $76,355 – $80,935 | 5.0% of HRI |
| $80,936 – $85,792 | 5.5% of HRI |
| $85,793 - $90,939 | 6.0% of HRI |
| $90,940 - $96,396 | 6.5% of HRI |
| $96,397 - $102,179 | 7.0% of HRI |
| $102,180 - $108,309 | 7.5% of HRI |
| $108,310 - $114,707 | 8.0% of HRI |
| $114,708 - $121,698 | 8.5% of HRI |
| $121,699 - $128,999 | 9.0% of HRI |
| $129,000 - $136,739 | 9.5% of HRI |
| $136,740 and above | 10% of HRI |
*HRI = 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.
How much could I save with salary packaging if I have a HECS/HELP debt?
Potential annual benefit for a health employee
| Salary | Take home pay without salary packaging ie. $9,010 on living expenses after-tax | Take home pay with salary packaging ie. $9,010 on living expenses before-tax | Benefit (annual) after repaying the HELP repayment |
|---|---|---|---|
| $55,000 | $35,448 | $37,641 | $2,193 |
| $60,000 | $38,323 | $40,427 | $2,104 |
| $65,000 | $40,823 | $42,799 | $1,976 |
| $70,000 | $43,573 | $45,461 | $1,888 |
ASSUMPTIONS: Estimated annual benefit based on an eligible employee salary packaging the full $9,010 per annum limit. PAYG tax rates effective 1 July 2020 have been used. HELP repayments are based on 2020-2021 HELP repayment thresholds and rates. An average administration fee of $220 is included in the example. The actual administration fee that applies to you may vary depending on your employer and may alter the calculation. Estimated annual benefit based on the assumption that an employee does not have any accumulated Financial Supplement debt. Your benefits will vary depending on your income and personal circumstances. Compulsory HELP repayments commence once your adjusted taxable income reaches $46,620.
IMPORTANT INFORMATION: The information provided in this brochure is factual information only and is not intended to constitute taxation or financial advice on the relative merits of salary packaging or on any other basis.Benefits and savings will vary depending on personal objectives, financial situation and needs. Maxxia recommends obtaining independent financial advice before making any financial decisions. Eligibility criteria and terms and conditions apply. All salary packaging proposals are subject to the requirements of the employer. Fees and charges apply. Maxxia may pay and receive commission or rebates in connection with some services and products it provides or arranges to be provided by third parties.
Potential annual benefit for a charity employee
| Salary | Take home pay without salary packaging ie. $15,900 on living expenses after-tax | Take home pay with salary packaging ie. $15,900 on living expenses before-tax | Benefit (annual) |
|---|---|---|---|
| $55,000 | $28,558 | $31,433 | $2,875 |
| $60,000 | $31,433 | $34,814 | $3,381 |
| $65,000 | $33,933 | $37,718 | $3,785 |
| $70,000 | $36,683 | $40,224 | $3,541 |
ASSUMPTIONS: Estimated annual benefit based on an eligible employee salary packaging the full $15,900 per annum limit. PAYG tax rates effective 1 July 2020 have been used. HELP repayments are based on 2020-2021 HELP repayment thresholds and rates. An average administration fee of $220 is included in the example. The actual administration fee that applies to you may vary depending on your employer and may alter the calculation. Estimated annual benefit based on the assumption that an employee does not have any accumulated Financial Supplement debt. Your benefits will vary depending on your income and personal circumstances. Compulsory HELP repayments commence once your adjusted taxable income reaches $46,620.
IMPORTANT INFORMATION: The information provided in this brochure is factual information only and is not intended to constitute taxation or financial advice on the relative merits of salary packaging or on any other basis. Benefits and savings will vary depending on personal objectives, financial situation and needs. Maxxia recommends obtaining independent financial advice before making any financial decisions. Eligibility criteria and terms and conditions apply. All salary packaging proposals are subject to the requirements of the employer. Fees and charges apply. Maxxia may pay and receive commission or rebates in connection with some services and products it provides or arranges to be provided by third parties.
How do I make sure I don't end up with a shortfall at tax time for unpaid HECS/HELP repayments?
Salary packaging could reduce your taxable income but may affect the way the ATO calculates your HECS/HELP repayments – which could leave you with a tax bill at tax time. So your employer may not be taking out enough HECS/HELP repayments or in some cases, may not be deducting any HECS/HELP repayments at all.
To avoid a possible shortfall at tax time for unpaid HELP repayments, you need to let your payroll department know when you start salary packaging as they may need to increase or recommence the amount of your withholding tax deductions.
While each employer is different, in most cases your payroll department will be able to help you manage the process and changing your HECS/HELP repayments is quite simple to do. Your payroll department may have its own form or they may ask you to use the ATO's form Tax declaration form or Withholding tax form. Check with your payroll department first.
This is quite simple to do and in most cases your payroll department will be able to help you manage the process.