Education Debt Repayment

You may have an employee with an education related debt to be repaid to the ATO via their PAYG Tax.

Typical loans include:

• HELP (HECS) Higher Education Loan Program
• SSL Student Start-up Loan
• ABSTUDY SSL ABSTUDY Student Start-up Loan
• TSL Trade Support Loan
• SFSS Student Financial Supplement Scheme

Employees are required to start repaying their debt through the taxation system once their repayment income is above the compulsory repayment threshold, even if they are still studying.

Repayment income is calculated from the amounts given on the employee's income tax return for:

• their taxable income;
• reportable fringe benefits (reported on their payment summary);
• total net investment loss (which includes net rental loss);
• reportable super contributions; and
• exempt foreign employment income amounts.
• The compulsory repayment threshold is adjusted each year (e.g. for 2017-18 it is $55,874).

The amount the employee repays each year is a percentage of their income. The percentage increases as their income increases, so the more they earn, the higher their repayment will be.

The ATO will calculate their compulsory repayment for the year and include it on their income tax notice of assessment.

Tax Scale Selection

To start an employee's debt repayments you will need to select the appropriate tax scale in Employee Maintenance.

In Employee Maintenance, open the employee and select the General tab.

In the Tax Scale field, select the appropriate tax scale from the drop down list.

If the employee is claiming the tax free threshold for this job, you will select:

• Tax Free Threshold + HELP/SSL/TSL Debt to repay a HELP, SSL or TSL Debt.
• Tax Free Threshold + FS Debt to repay an SFSS Debt.
• Tax Free Threshold + HELP/SSL/TSL + FS Debt to repay a HELP, SSL or TSL Debt and an SFSS Debt.

If the employee is not claiming the tax free threshold for this job, you will select:

• No Tax Free Threshold + HELP/SSL/TSL Debt to repay a HELP, SSL or TSL Debt.
• No Tax Free Threshold + FS Debt to repay an SFSS Debt.
• No Tax Free Threshold + HELP/SSL/TSL + FS Debt to repay a HELP, SSL or TSL Debt and an SFSS Debt.

These tax scales will automatically increase the employees tax withheld to include the current thresholds and tax rates for the relevant debt type(s).

Financial Hardship

If the employee believes that making their compulsory repayment would cause them serious financial hardship or there are other reasons why they should not have to make a compulsory repayment, they can apply to the ATO to defer their repayment.

They will need to complete the Deferring your compulsory HELP, HECS or Financial Supplement repayment form, which is available on the ATO website.

The form asks for a detailed statement of their household income and expenditure to justify their claim of serious hardship.

Thresholds & Repayment Rates

Please see http://studyassist.gov.au/sites/studyassist/payingbackmyloan/loan-repayment/pages/loan-repayment for additional information on repayment thresholds and rates.