HECS / HELP & Salary Packaging

How does Salary Packaging affect me if I have a HELP or TSL debt?

If you are salary packaging with your employer and you have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt it is important that you understand that your income for HECS/HELP or TSL repayment purposes will increase.  This means you may end up paying more in HECS/HELP or TSL as a result of salary packaging.

Your HECS/HELP or TSL Repayment Income is the combined total of your taxable income, reportable fringe benefits (as reported on your PAYG Payment Summary), total net investment losses (which includes net rental losses), reportable super contributions and any exempt foreign employment income amounts.

 

EXAMPLESandy has an annual Gross Income of $45,000 and currently has a HECS/HELP debt. Sandy is employed by a Public Benevolent Institution and is currently salary packaging $15,899 onto the Community Salary Packaging General Expenses Card.

To calculate Sandy’s HECS / HELP Repayment Income she therefore needs to do the following:


Note: The Reportable Fringe Benefit Amount (RFBA) is calculated by multiplying the amount spent on Sandy’s General Expenses Card by 1.8868 (i.e. $15,899 x 1.8868) as per the ATO’s formula.

How much HECS/HELP will Sandy pay?

Before salary packaging Sandy’s repayment income would be $45,000.  This means she would not need to repay any HECS / HELP for the year as her repayment income is below the $54,869 threshold where HECS / HELP repayments commence.

After salary packaging Sandy will now be liable for a HECS/HELP repayment based on an income of $59,101.

Sandy’s HECS / HELP liability will be $2,364 ($59,101 x 4.0%).

See the table on the right to work out the repayment %.

Sandy will now need to make a payment to the Australia Taxation Office (ATO) for the $2,364 when she lodges her tax return.

HECS/HELP repayments will not automatically be taken out of Sandy’s salary by her employer as her taxable income is only $29,101 and well under the HECS/HELP Repayment Threshold of $54,869.

Sandy needs to either budget for the $2,364 payment when she lodges her tax return OR may decide to inform her employer to voluntarily deduct additional tax each pay day to cover the shortfall.

 

DISCLAIMER:
This information is designed to assist you to understand the implicationsof salary packaging, however it is not to replace appropriate and individualised financial advice.  Community Salary Packaging takes no responsibility for the way you apply this information to your personal circumstances.