Higher Education Contribution Scheme (HECS) debt is a financial assistance program that helps Australian students with their study expenses. However, it may result and become a financial burden that most students would need to repay.
Unlock the secrets to minimise your HECS-DEBT repayments and fast-track your financial freedom. Discover expert strategies to minimize your student loan burden and pave the way for a brighter future.
You can employ various effective strategies to minimise your HECS-DEBT repayment and alleviate financial distress. As the debt amount is interest-free, most people would take it for granted and delay payments.
This article provides valuable insights and practical tips to help you minimise your HECS-DEBT more effectively.
Understanding Loan Repayment:
Repaying your HELP debt is primarily done through the Australian Taxation Office (ATO) via compulsory and voluntary repayments. You must meet a minimum income threshold to start contributing towards debt repayment.
ATO keeps track of the HECS loan amount and has set mechanisms to help students repay it. Compulsory repayments usually are triggered when your income exceeds the repayment threshold, while voluntary repayments offer an additional means to pay off your debt faster.
Compulsory Repayments:
Compulsory repayments are calculated based on your income rather than the size of your debt. These payments form part of the pay-as-you-go tax and are taken out and contributed by the employer.
The employer would then typically submit the collected amount to ATO. You can check the status of your annual compulsory repayments when you file your annual tax returns.
It is essential to know the annual repayment thresholds set by the ATO, as they determine the percentage of your income required to repay. Currently, for the 2023-2024 income year, the threshold is set at $51,550. Below this threshold, no compulsory repayments are required.
The compulsory payment threshold for the financial year 2023-24:
HECS REPAYMENT RATE 2023-24:
| Repayment Income Below $51,550 | Repayment rate |
| $51,550 – $59,5181 | 1% |
| $59,519 – $63,0892 | 2% |
| $63,090 – $66,875 | 2.50% |
| $66,876 – $70,888 | 3% |
| $70,889 – $75,140 | 3.50% |
| $75,141 – $79,649 | 4% |
| $79,650 – $84,429 | 4.50% |
| $84,430 – $89,494 | 5% |
| $89,945 – $94,865 | 5.50% |
| $94,866 – $100,557 | 6% |
| $100,558 – $106,590 | 6.50% |
| $106,591 – $112,985 | 7% |
| $112,986 – $119,764 | 7.50% |
| $119,765 – $126,950 | 8% |
| $126,951 – $134,568 | 8.50% |
| $134,569 – $142,642 | 9% |
| $142,643 – $151,200 | 9.50% |
| $151,201 and above | 10% |
The rates have changed a bit since 2022-23 financial year, if you are comparing how much you paid in prior year. Please check the percentages as follow for 2022-23 financial year
| Repayment income | Repayment rate |
| Below $47,014 | Nil |
| $47,014 to $54,281 | 1.00% |
| $54,282 to $57,538 | 2.00% |
| $57,539 to $60,991 | 2.50% |
| $60,992 to $64,650 | 3.00% |
| $64,651 to $68,529 | 3.50% |
| $68,530 to $72,641 | 4.00% |
| $72,642 to $77,000 | 4.50% |
| $77,001 to $81,620 | 5.00% |
| $81,621 to $86,518 | 5.50% |
| $86,519 to $91,709 | 6.00% |
| $91,710 to $97,212 | 6.50% |
| $97,213 to $103,044 | 7.00% |
| $103,045 to $109,226 | 7.50% |
| $109,227 to $115,678 | 8.00% |
| $115,679 to $122,728 | 8.50% |
| $122,729 to $130,091 | 9.00% |
| $130,092 to $137,897 | 9.50% |
| $137,898 and above | 10.00% |
If you are confused and want to know an estimated amount of compulsory payments. Please utilise our HECS loan repayment calculator to see your Compulsory Annual Repayment amount.
Additional information about Compulsory Repayments:
When are you not required to make Compulsory HECS payments?
ATO allows individuals who have exceptional circumstances to avoid paying compulsory repayments until they can do so. Some situations may be:
- If your income is lower than ATO, pre-set income threshold.
- If you qualify for low family income, you may not be required to make a compulsory repayment.
- If you have a spouse or dependents claiming a reduction in Medicare levy, you can seek exemption from compulsory repayments.
Voluntary Repayments:
What can be better than being debt-free? Want to get rid of debt quicker?
ATO allows HECS debt holders to repay voluntarily to minimise their debt balances. Voluntary repayments allow you to make extra payments towards your HELP debt, which can significantly reduce the overall amount owed.
Unlike compulsory repayments, voluntary repayments are not refundable. You can make voluntary repayments to the ATO at any time, and these payments can be beneficial in speeding up your debt repayment process.
Making voluntary repayments can help you get rid of the debt significantly quicker. By making voluntary repayments you can the overall amount you owe and accelerate the repayment process. By proactively managing your finances, you can allocate funds towards your debt and potentially save on future indexation.
When is the best time to make a voluntary repayment?
ATO advises that it is best to make a voluntary repayment before your lodge your tax returns. This can help you avoid indexation for future years and would assist you in keeping your loan amount save from inflation hikes.
I advise anyone who wants to make voluntary repayment to do it before 01 June, as this will help you get the notice of assessment from ATO. And it will provide ATO with sufficient time to process your repayments. This will save your loan from indexation and ensure that it gets reflected in your tax return for that year.
To read further on voluntary repayment please visit here.
Here are a few other golden tips to keep your HECS loan at a minimum:
Capitalising on Lower Repayment Rates:
Taking advantage of lower repayment rates can be a strategic approach to minimise your HECS-DEBT.
This might sound counterintuitive but saving and contributing towards your student loan even when you are earning below threshold income can help you keep your debt balance low. Or else, by making voluntary repayments when your income falls within a lower repayment bracket (yes, you read it right), you can reduce the amount you need to repay.
My personal advice is that the loan repaid today is better than the loan repaid five years from now. Always try to maximise repayments by controlling your current finances.
Seeking Professional Advice:
Talk to your Accountant. If you don’t have one, see one. And if you only use one for your tax returns, it is time to sit with them and ask a few questions.
Whenever you see an Accountant, it is always best to ask a few HECS-related questions. They understand what is happening with ATO rulings and how changes to loans can help you. So, when the year ends, ask them to help you speed up your repayments rather than just seeing your Accountant for tax returns.
A professional Accountant can provide personalised guidance on minimise your HECS-DEBT effectively. They can assist in assessing your financial situation, determining the best repayment strategy, and maximising eligible tax deductions to lower your repayment income.
Managing HECS Debt and Financial Goals:
It’s important to consider how your HECS debt may impact other financial goals, such as saving for a house. When assessing your borrowing capacity, lending providers factor in your liabilities and debts, including HECS and HELP loans.
Therefore, understanding the potential impact of your HECS debt on other financial endeavours is crucial. And take additional steps before you sign up for any other debt.
Keeping Records and Claiming Deductions:
It is an excellent practice to maintain organised records of your financial affairs. Easier said than done!
People usually find it boring; however, in my experience, those who stay updated with changes in their financial situation can easily cope with any financial hardships.
Your eligible tax deductions and expenses are vital to reducing your repayment income. Keep a record of your expenses throughout the year. Show your Accountant all your expenses so that they are reflected in your tax returns.
This diligence ensures you claim all entitled tax deductions, which can ultimately decrease the amount of tax and debt you owe.
Consider Timing:
Timing plays a role in minimising your HECS-DEBT. As debt is subjected to indexation, there is a slight, though not insignificant, increase in debt amount each financial year.
Making voluntary payments before lodging your tax return can help avoid paying an indexation surplus on the amount paid off.
Additionally, ensuring your employer accurately withholds the required amounts each week can prevent large tax payables at tax return time.
In my experience, minimising your HECS-DEBT repayment is possible with careful planning, strategic decision-making, and leveraging the available options.
You are responsible for taking control of your finances, and the best way to manage debt for an individual is to make regular payments. It is vital to understand compulsory and voluntary repayments, consult an Accountant, and manage your finances effectively, to contribute towards reducing your HECS debt burden and achieving financial freedom.
FAQs
What is a HECS-DEBT repayment?
A: HECS-DEBT repayment refers to the repayment of a Higher Education Contribution Scheme (HECS) debt, which is a loan provided by the Australian government to eligible students to help finance their tertiary education.
Q2: Can I pay off my HECS-DEBT early?
A: Yes, you can pay off your HECS-DEBT early by making voluntary repayments. There are no penalties for paying off your debt ahead of schedule.
Q3: What happens if I earn below the HECS-DEBT repayment threshold?
A: If your income is below the minimum repayment threshold, you won’t be required to make any HECS-DEBT repayments.
Q4: Can I make repayments while studying?
A: Yes, you can make voluntary repayments towards your HECS-DEBT while you are still studying. It’s a good strategy to reduce your debt burden.
Q5: How do I make voluntary repayments towards my HECS-DEBT?
A: To make voluntary repayments, you can use various methods, such as online payments through your MyGov account, BPAY, direct debit, or by mailing a check to the Australian Taxation Office (ATO).
Q6: Are HECS-DEBT repayments tax-deductible?
A: No, HECS-DEBT repayments are not tax-deductible. They are considered personal debts and cannot be claimed as a deduction on your tax return.
Q7: Can I check my HECS-DEBT balance?
A: Yes, you can check your HECS-DEBT balance by logging into your MyGov account and accessing the Australian Taxation Office (ATO) section. It will provide you with details about your outstanding balance, and repayments.
