Higher Education Loan Programs (HELP) are loans that are provided to students by the Australian government to allow those students to receive education from Australian educational institutions.
The debts that are incurred by the students to attain their qualifications are then paid back out of future income received (you start paying it back once you earn more than $51,550 in the 2023/2024 financial year). There are various thresholds of income that the student will need to attain before they start paying the HELP debts back. The thresholds for payment are shown here.
The Australian government indexes any outstanding HELP debts each year to take into account inflation. That is, the amount of loan that is outstanding will increase each year at 1 June based on the inflation rate for that year. As you know, the inflation rate has been significant in the last 2 years. This means that the indexing of HELP debts has been higher than ever before. In fact, this year (ie at 1 June 2024) any outstanding HELP debts will be indexed upwards by 7%!
So, what can you do to minimise the financial effect of this indexing?
The indexing is applied based on the outstanding HELP balance as at 1 June 2024. Consequently, this will give you the opportunity to decrease the effect of this indexing by reducing the HELP balance before 1 June. The 7.1% indexing rate is likely to be far more than any interest rates you have on your savings so it may make sense to use some savings to decrease the HELP debt instead.
So, the planning around this strategy is as follows:
- If you were planning to pay the HELP debt off from your own funds then do it now, before 1 June.
- If you have a tax return due soon, it would make sense to do the return very soon and then make sure the tax assessment is paid well before 1 June. This will ensure that the HELP debt repayment that makes up that assessment has been deducted from the outstanding balance before the 1 June indexing takes place.
- Similarly, if there is an assessment already issued for a taxpayer that has a HELP debt, and there is a HELP debt repayment involved in the assessment, please make sure that the assessment is paid well before 1 June so, again, the outstanding HELP debt is reduced before indexing hits.
By taking these measures you can ensure that your HELP debt indexing is kept to a minimum.
If you want more details on how to pay your outstanding HELP debt please see the ATO link here.
If you have any queries in relation to the above, please discuss with your client manager at KSW.
Author: Michael Goodrick
*Correct as of 28 March 2024
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is for general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability is limited by a scheme approved under professional standards legislation.
