14 May 2018
By Ashleigh Donaldson – Senior Accountant at i2 advisory
HELP Debt Recovery from Non-resident Australians
If you have a HELP (Higher Education Loan Program) debt, from 1 July 2017, should you choose to pack your bags and intend to, or have already relocated overseas for more than 183 days in a 12-month period you must notify the Australian Taxation Office.
With what was estimated as $20-$30 million each year lost due to graduates moving overseas, the government is no longer prepared to foot the bill for your education should you choose to ditch Australia and chase the sun or snow overseas. For years it’s been known that should you relocate overseas with the view to never return it’s very likely your HELP debt would never catch up with you, I mean how could it? You’re no longer an Australian resident for tax purposes and based on the previous criteria, you were under no obligation to make any repayments…. Hallelujah!
The ATO says no more!
From 1 July 2017 should you leave the country with a view to be overseas for more than 183 days or already reside overseas and have a HELP debt you need to notify the Australian Taxation Office via an ‘overseas travel notification’
This notification brings an ongoing yearly obligation to report your total converted worldwide income or lodge a non-lodgement advice to the ATO. Depending on your worldwide income, you may be required to make compulsory HELP debt repayments similar to if you were working and residing in Australia.
When to report? If you have, for the year ended 30 June 2017:
- Converted worldwide income less than $13,717 (AUD) – You will need to lodge a ‘non-lodgement advice’ to ATO
- Converted worldwide income greater than $13,717 (AUD) – You will need to report worldwide income via ATO Online Services (a Tax Return).
There are time limits and penalties for late lodgement – so please let me know if you would like more information, if this is relevant to your circumstances.
The Overseas Travel Notification can be submitted online via the ATO Online Services (via myGov) or through a Registered Tax Agent.
It’s important to note these changes are not grandfathered and therefore apply to Non-residents already residing overseas and to new and existing HELP debts.
Australian taxpayers have lost an estimated $400 million to $800 million due to non-repayment of debts from students living overseas since the student loan scheme started in 19891 With this in mind it’s no surprise the ATO are cracking down on this, given the average HELP debt is $30,000 for a business degree!
Proposed Changes to HELP Repayment Thresholds – 1 July 2018
As the HELP Repayment Thresholds bill currently sits before the senate lets discuss how these proposed changes could affect you and most importantly your take home pay.
The changes propose a lower minimum repayment level for individuals that earn over $42,000 from 1 July 2018. The repayment rate applicable is 1% up to $51,957 with a sliding tier as your income increases. Under these new thresholds, graduates may find they are caught almost immediately once entering the work force
What does this mean? An individual currently earning $45,000 will be $450.00 worse off under the proposed thresholds ($45,000 x 1%). Right now a compulsory payment is not required until their income reaches $55,874 (2017/18).
If you are already caught under the current repayment thresholds it’s likely you won’t be affected by these changes, some of us might even see our repayments decrease. For example, if your income sits between $56,176 & $63,119 the proposed repayment rate is less than the current 4% rate. However, should your HELP repayment income be over $131,989 your repayment level will increase from 8% to 10%.
Most importantly if you have just finished university and secured that elusive dream job, don’t forget to tick yes to ‘I have a HELP debt’ on the ATO Tax File Number Declaration. This ensures that the right amount of tax is taken from your pay each pay period to cover your income tax and your compulsory HELP debt repayment. The last thing you want is additional tax payable at tax time!
Questions? Get in contact with me at adonaldson@nulli2advisory.com.au
1 Professor Bruce Chapman and Dr Timothy Higgins, January 2013, the costs of unpaid HECS debts from graduates going overseas
2 https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/HELP
