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
Australian expats to repay HELP debts
The focus on expatriates, by the Australian government continues sadly! In an effort to further target Aussie expats, the government introduced legislation last month (nov 2015) that will require Australian expats to repay HELP debts and student loans!
For the last 16 years or more, the vast majority Australian non-resident expats who had accrued a HELP (Higher Education Loan Programme) debt via previous study at an Australian university, have been able to legitimately avoid making HELP debt repayments after moving overseas.
Until now, compulsory HELP debt repayments were only required to be made once a person’s Australian taxable income exceeded $54,126. This threshold is rarely exceeded by most non-resident expats and so no HELP debt has been required to be repaid! Happy days . . . however things are about to change, sadly!
I earn more than $54,000 – why haven’t I needed to pay my HELP debt?
Under Australia’s residency rules, non-resident expats are only taxable on their Australian source income (e.g. Australian rents, dividends, interest etc) and not on their overseas income.
Thus, for most Australian expats, although your worldwide income generally exceeds the HELP compulsory repayment threshold, you’re only required to include your Australian source income in your Australian tax return. Consequently the HELP repayment threshold is rarely exceeded and thus compulsory HELP repayments were often, not required to be made most Australian expats.
As of last month, the government announced that it will be seeking to close the loophole that allows Australian expats to avoid repayment of their HELP debts.
In November, the Senate passed legislation to collect HELP loans from Australians who now live abroad but accrued their study debt in Australia. The legislation applies to both HELP (Higher Education Loan Programme) and TSL (Trade Support Loan) debts.
How will this affect me?
If you’re an expat, you now need to consider your Australian student loan when you are living and working overseas.
From 1st July 2017, if you’re an Australian expat or a spouse of an Australian expat and you have a HELP or TSL debt, the government will require you to lodge a tax return and declare your worldwide income to the Australian Taxation Office, even if that income is zero.
If you are earning over the income repayment threshold, you the government will charge you a compulsory repayment amount for the year and issue you with a tax bill.
When does this take effect?
The legislation commences from 1st January 2016 with compulsory repayments to take effect from 1st July 2017 (based on the 2016-2017 financial year).
What are the thresholds & compulsory repayment rates?
The current repayment threshold for 2015 is AU$54,126, and the repayment rate is 4% of your “repayment income”, rising to 8% of your “repayment income” but this is subject to change, so keep your eyes open for changes for the upcoming financial year.
“Repayment income” includes a person’s taxable income PLUS any total net investment loss (which includes net rental losses), total reportable fringe benefits amounts, reportable super contributions and exempt foreign employment income and under these measures will also include an expat’s worldwide income.
What do I need to do?
Ultimately, if you’re an expat living overseas and you have a HELP debt, you will be required to lodge a return from the 2016-2017 financial year, in order to notify the government of all of your overseas income, even where you don’t earn any income overseas . . . e.g. as in the case of a non-working spouse of an Australian expat.
Furthermore, from 1st January 2016, if you’re an Australian expat with a HELP or TSL debt, you need to notify the Australian Tax Office (ATO) if you intend on being away for more than six months. You can do this easily with a myGov account, so you don’t have to phone and speak to anyone in a different timezone.
If you’re already overseas, you’ll have right up until 1st July 2017 to register. You will ultimately need to self-assess your income for the 2016-2017 Financial Year and submit the details of your worldwide income to the ATO. The self-assessment is due, along with your Australian tax return, on the 31st October every year, or later if you use a tax agent such as ourselves.
Are there any strategies that I can take?
Short of reducing your income below the thresholds (never recommended), the only tangible strategy to reduce the amount of HELP payable is to consider making a voluntary repayment of your HELP debt. Doing so will attract a 5% discount from the government and thus save you a small amount.
To gain the maximum benefit of this discount, note that your voluntary payment should be paid prior to 1st July 2017, and should be paid out in full. If not paid in full, the government, will levy a compulsory payment of your HELP debt for your 2016-2017 return and future returns until the balance has been repaid.
Why are the government doing this?
In relation to this measure the government has stated that they spend money on training and educating citizens, and thus want a fair system where every user pays an equal amount for their education, regardless of where they choose to implement their learning. The government reports that it will save more than AU$150 million over the coming decade by ensuring that offshore residents pay their student debts.
To learn more, visit the ATO website by clicking here
Latest posts by Shane Macfarlane (see all)
- Death of the Main Residence Exemption for Australian expats - 05/12/2019
- Main residence CGT exemption abolished for Aussie expats - 22/11/2019
- Determining Your Tax Residency - 24/10/2019