How is my HELP debt affected by salary packaging?
You can benefit from salary packaging even if you have a HELP (Higher Education Loan Program) or HECS (Higher Education Contribution Scheme) debt. When you salary package, you are using money before it gets taxed. This could reduce your taxable income – and increase your disposable income.
Understanding your 'adjusted taxable income'
Although salary packaging can reduce your taxable income, it can increase the gross value of your salary. This is referred to as your 'adjusted taxable income'.
How your adjusted taxable income impacts HELP/HECS repayments
The ATO assesses you on your 'adjusted taxable income' when working out how much you should pay in HELP or HECS repayments. Your adjusted taxable income equals your salary plus the gross value of your fringe benefits (e.g. $40,900 + $17,000 = $57,900).
HELP repayments are calculated based on your 'HELP Repayment Income'. In most cases, this will be your annual taxable income plus your total Reportable Fringe Benefits Amount shown on your PAYG Payment Summary.
HECS/HELP repayment income (HRI) | Repayment rate |
---|---|
Below $46,620 | Nil |
$46,620 – $53,826 | 1% of HRI |
$53,827 – $57,055 | 2.0% of HRI |
$57,056 – $60,479 | 2.5% of HRI |
$60,480 – $64,108 | 3.0% of HRI |
$64,109 – $67,954 | 3.5% of HRI |
$67,955 – $72,031 | 4.0% of HRI |
$72,032 – $76,354 | 4.5% of HRI |
$76,355 – $80,935 | 5.0% of HRI |
$80,936 – $85,792 | 5.5% of HRI |
$85,793 - $90,939 | 6.0% of HRI |
$90,940 - $96,396 | 6.5% of HRI |
$96,397 - $102,179 | 7.0% of HRI |
$102,180 - $108,309 | 7.5% of HRI |
$108,310 - $114,707 | 8.0% of HRI |
$114,708 - $121,698 | 8.5% of HRI |
$121,699 - $128,999 | 9.0% of HRI |
$129,000 - $136,739 | 9.5% of HRI |
$136,740 and above | 10.0% of HRI |
*RI = 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.
How much could I save with salary packaging if I have a HELP debt?
The table below shows the potential annual benefit from salary packaging with a HECS/HELP debt.
Potential annual benefit for a health employee
Salary | Take home pay without salary packaging** | Take home pay with salary packaging** | Benefit (annual) |
---|---|---|---|
$55,000 | $35,448 | $37,641 | $2,193 |
$60,000 | $38,323 | $40,427 | $2,104 |
$65,000 | $40,823 | $42,799 | $1,976 |
$70,000 | $43,573 | $45,461 | $1,888 |
*Assumptions: Estimated Annual Benefit based on an eligible health employee salary packaging the full $9,010 per annum limit and $2,650 for meal entertainment expenses. PAYG tax rates effective 1 July 2020 have been used. HELP repayments are based on 2020-2021 HELP repayment thresholds and rates. An average administration fee of $190 is included in the example. The actual administration fee that applies to you may vary depending on your employer and may alter the calculation. Estimated Annual Benefit based on the assumption that an employee does not have any accumulated Financial Supplement debt. Your benefits will vary depending on your income and personal circumstances. Compulsory HELP repayments commence once your adjusted taxable income reaches $46,620.
** i.e. $9,010 on living expenses post-tax
Potential annual benefit for a charity employee
Salary | Take home pay without salary packaging** | Take home pay with salary packaging** | Benefit (annual) |
---|---|---|---|
$55,000 | $28,558 | $31,433 | $2,875 |
$60,000 | $31,433 | $34,814 | $3,381 |
$65,000 | $33,933 | $37,718 | $3,785 |
$70,000 | $36,683 | $40,224 | $3,541 |
*Assumptions: Estimated Annual Benefit based on an eligible charity employee salary packaging the full $15,900 per annum limit and $2,650 for meal entertainment expenses. PAYG tax rates effective 1 July 2020 have been used. HELP repayments are based on 2020-2021 HELP repayment thresholds and rates. An average administration fee of $190 is included in the example. The actual administration fee that applies to you may vary depending on your employer and may alter the calculation. Estimated Annual Benefit based on the assumption that an employee does not have any accumulated Financial Supplement debt. Your benefits will vary depending on your income and personal circumstances. Compulsory HELP repayments commence once your adjusted taxable income reaches $46,620.
** i.e. $15,900 on living expenses post-tax
Could I salary package additional HELP debt repayments?
Yes, you can. Additional HELP repayments can be salary packaged if you wish to pay your HELP debt off sooner.
Example:
Barry has a debt of $4,500 and makes a $1,500 voluntary repayment reducing his total debt to $3,000.
How do I estimate how much I may need to change my HELP repayments?
Use our HELP calculator for salary packaging.
Contact Maxxia on 1300 123 123 to see how salary packaging could help you pay your HELP debt off sooner and increase your disposable income.
How do I make sure I don't end up with a debt at tax time for unpaid HECS/HELP repayments?
Salary packaging could reduce your taxable income but may affect the way the ATO calculates your HECS/HELP repayments – which could leave you with a tax bill at tax time. So your employer may not be taking out enough HECS/HELP repayments or in some cases, may not be deducting any HECS/HELP repayments at all.
To avoid a possible shortfall at tax time for unpaid HELP repayments, you need to let your payroll department know when you start salary packaging as they may need to adjust the amount of your withholding-tax deductions.
While each employer is different, in most cases your payroll department will be able to help you manage the process and changing your HECS/HELP repayments is quite simple to do.
Your payroll department may have its own form or they may ask you to use the ATO's Tax declaration form or Withholding tax form. Check with your payroll department first.
This is quite simple to do and in most cases your payroll department will be able to help you manage the process.