2 main reasons why you have a tax debt that is linked with your HELP/SSL debt – By Pat Hoey
2 main reasons why you have a tax debt that is linked with your HELP/SSL debt
There are two main reasons why when you complete your tax return and you have a tax payable problem due to having a government HELP or student loan debt.
- You worked two jobs at the same time
- You have salary packaging as part of your wage.
More information on these two scenarios are below, but first lets look at the % repayment amount, based on your repayment income for the year (so what you repay is based on a % of your income, not what your debt is).
| Repayment Income Thresholds | Rate % | Repayment Income Thresholds | Rate % | |
| Below $54,535 | Nil | $100,175 – $106,185 | 6.0% | |
| $54,435 – $62,850 | 1.0% | $106,186 – $112,556 | 6.5% | |
| $62,851 – $66,620 | 2.0% | $112,557 – $119,309 | 7.0% | |
| $66,621 – $70,618 | 2.5% | $119,310 – $126,467 | 7.5% | |
| $70,619 – $74,885 | 3.0% | $126468 – $134,056 | 8.0% | |
| $70,856 – $79,346 | 3.5% | $134,057 – $142,100 | 8.5% | |
| $79,347 – $84,107 | 4.0% | $142,101 – $150,626 | 9.0% | |
| $84,108 – $89,154 | 4.5% | $150,627 – $159,663 | 9.5% | |
| $89,155 -$94,503 | 5.0% | $159,664 and above | 10.0% | |
| $94,505 – $100,174 | 5.5% |
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You worked two jobs at the same time.
When you do your tax return, your combined income is at a higher rate of what you need to pay back your student HELP debt. As each employer will only take out the amount required based on only what income you have with them. So when you combine their income, your repayment rate jumps up.
If one of your jobs was under $54,000 of income for the year, they would not have required to take out any repayment, which makes it even worse for you.
An example of this is a person who works two jobs at the same time over the year, and earns $50k at one job, and $30k at the other job, Now both of these separately are under the repayment levels as noted in table above (so neither work doesn’t take an extra tax out). But combined, they are at $80k, which you then need to pay 4%. Which this comes to $3,200 to repay.
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You have salary packaging as part of your wage.
So when you get taxed on your wage through the year, they only tax you based on what you’re reduced wage amount is (after salary packing comes off your salary).
But at tax return time, the repayment income to pay off your HELP debt includes both your taxable income, plus your reportable fringe benefit of the salary packaging (which gets grossed up to what the value is at pre-tax dollars as if paying 47% tax).
An example is somebody who may work in the public hospital system that gets to salary sacrifice reportable fringe benefit of $17,000 plus $5000 of entertainment (so total $22,000). But this $22k is the before tax value, so they reduce this by the top tax rate of 47%, so you really only get to use 53% of this to salary sacrifice and help reduce your wage (which is $11,660 comes off your gross wage, and you only pay tax on the reduced amount).
But then for the HELP repayment income, they add the full $22,000 to reduced wage. Which then puts you at a higher income and a bigger percentage rate of your income to repay the HELP debt.
An example of this is say a nurse who has a yearly gross salary of $81k, but after salary sacrificing $11k, this gets reduced to $70k of taxable income (and in the 2.5% range). So work would have taken an extra tax of 2.5% of $70,000 over the year, which is $1750.
But the repayment income is this $70k plus the $22k grossed up fringe benefit, so is at $92k, and the rate now is at 5%. This is now at $4600 to repay.
Tax tip
Please note – you are not out of pocket over the whole year – you have just received more into you bank account throughout the year from your pay, which should have had more tax withheld on your pay. Which to help with next year, you may choose to ask your employer to take more tax out, so this can go towards next year tax return.
By Pat Hoey