Student HELP Debt Loophole

Student HELP debt loophole closed to Aussie expats

Update – 9th May 2017: Please note that the Australian government handed down it’s 2017 Australian Federal budget today, with proposals to reduce the HELP debt repayment thresholds. It is expected that this will catch significantly more expats in the HELP debt repayment loop, than was originally proposed in 2015 when the government introduced measures requiring expats to repay their HELP debts from 1st July 2017.

In the 2015 Federal Budget the Australian Government brought in measures requiring expat Australians (who are living overseas and earning above the HELP debt repayment threshold) to repay their HELP debts.

Under this budget measure, a new minimum repayment threshold of $42,000 will be established with a 1% repayment rate. Currently, the minimum repayment threshold for the 2017/18 year is $55,874 with a repayment rate of 4%.

A maximum threshold of $119,882 with a 10% repayment rate will also be introduced. Currently, the maximum repayment threshold for the 2017/18 year is $103,766 with a repayment rate of 8%.

To learn more about these and other 2017 budget measures proposed, take a look at our recent blog post 2017 Australian Federal Budget – Expats the Clear Losers.

Source: Budget Paper No 2, p 83.

Original article below

Student HELP debt loophole closed to Aussie expats

Living overseas used to be a way for Australians to take advantage of an unintended student HELP debt loophole and legitimately avoid repaying their HECS/HELP debts – interest free loans offered by the federal government to fund higher education studies.

But this little bonus for Aussie expats is all about to change.

Student HELP Debt Loophole Closed

The amount of HECS/HELP debt now owed collectively to the Australian government now stands in excess of $60 billion – and so the incumbent administration has been putting its mind to how to get more of it back faster.

So, from July of 2017, if you’re an Aussie expat with a HECS/HELP or a TSL (Trade Support Loan) debt and over the minimum repayment threshold of $54,126 in annual income, you’ll lose your entitlement to sit out your debt repayments until you return to Australia.

This is a decision that will affect tens of thousands of overseas Australians, including many who may never have repaid their debts at all, but one that Minister Christopher Pyne says will mean a $140 million income boost for the government over the next decade.

Previously, those with student debts could voluntarily make payments, but were not legally obliged to.

The change will apply to any Australian who lives overseas for more than six months at a time. The government is requiring these Australians – including anyone who intends their working absence from the country to exceed six months – to let them know their overseas contact details via myGov.

The update must be lodged on myGov, Australia’s online communication portal, within seven days of the person leaving the country.

Mr Pyne defended the decision on the basis that it is simply fairer to those Aussies who stay at home and have to pay back their loan when their income means they can afford to.

“Currently, because graduates living overseas don’t have to do an Australian tax return, there is no way to know if they are earning above the threshold that triggers HECS repayments and many get off scot-free,” he said.

“There is no good reason why someone working as a banker in London or New York and earning over the threshold shouldn’t pay back what they owe Australia,” Mr Pyne added.

Photo: The Graduates by sakeeb licensed under Creative commons 2
Shane Macfarlane
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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia).Shane's passionate about tax and legitimate tax minimisation, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.Beyond tax and accounting, Shane's an entrepreneur, having devised, created and founded a successful accounting startup, Fifo Workpapers (acquired by accounting software giant, Intuit inc. in 2013)

In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.
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Comments 2

  1. If an Australian resident for tax purposes repaid the last instalment of their HELP debt after 1 July 2017 (e.g. in August 2017) such that they no long have any outstanding HELP debts, and then move overseas to work in that financial year and became a non-resident for tax purposes, are they still required to notify ATO of their overseas contact details on MyGov?

    1. Post
      Author

      Hi Ms G,

      Thanks for your question. Sadly the legislation still requires you to notify the government of your worldwide income for HECS/HELP debt reporting purposes. Specifically s.154.18 (3) of the Education Support Act 2003 requires that foreign residents who have an accumulated HELP debt balance as at 1st June 2017 MUST in fact report their worldwide income to the ATO, even where that debt was paid off prior to (or after) 30th June 2017.

      So what this means for you sadly, is that you’ll still be required to lodge a return and report your worldwide income for the year.

      I wish I had better news for you but that’s the way the rules have been written unfortunately.

      Thanks again for your question.

      Regards

      Shane

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