From 1 July 2019, the HECS study loan repayment income threshold is being lowered to $45,881 from $51,957.
This is one of the more sneaky tax changes as it has not been published well at all. To make it worse it affect many people early in their career who are also saving for a home.
If you earn between $45,881 and $52,973, you will be required to make a compulsory repayment of 1.00% of your annual income. If you earn less than $45,881, you are not required to make repayments to your study loan in the 2019-20 financial year.
Worked Example:
If you earnt $50,000 gross income in the 2018-19 year, you would not have to pay additional amounts to cover the compulsory repayments.
In the 2019-20 year, if you earn $50,000 gross income, you will need to pay an additional $500.00 ($50,000 * 1.00%) in tax to cover the compulsory repayments. This will reduce your net take home pay by $500 per annum or approximately $9.62 per week.
If you earn $54,000 per annum, in the 2019-20 year you will pay an additional $550.27 per annum ($52,973 * 1.00% + ($54,000 – $52,973) * 2.00%).
What this means for you:
If you have a HECS/HELP or other student loans through the government, you need to ensure that you have informed your employer than you have a study loan.
They will then withhold additional income from your salary to cover the compulsory repayment. Any differences will be calculated at tax time and either refunded to you or the ATO will request payment to make the difference.
Traps!
If you have two jobs and the combined gross annual income is above the threshold of $45,881, you will have to pay the compulsory repayment. However, with two jobs, there is the possibility of each job individually totalling to under the threshold amount and so your employers would not take out any extra amounts to account for the compulsory repayments.
This could lead to a nasty tax bill at the end of the year for you!
If you find yourself in this scenario, you could ask one (or both) of your employers to take extra tax out of your wage to account for the compulsory repayments.
Contact us here at Cascade Consulting Services for help on calculating how much to take out.
For more information about Compulsory Repayments, see the ATO page at https://www.ato.gov.au/individuals/study-and-training-support-loans/compulsory-repayments/
For more information about the income repayment thresholds, see the ATO page at
