Jarrod Rogers CPA, 3 July 2020 No... you definitely can't. ...claim your coffee machine, that…
One of the most common financial regrets clients have is their HECS debt.
That $30,000 debt seems like it will never get any smaller. The biggest regrets come from people who wish they’d never enrolled in the course in the first place.
Maybe you did the first year of a degree before switching courses or an entire Arts degree that you realised, in your final year, doesn’t lead to an actual job. Maybe you started a course with high hopes and lost enthusiasm after the first semester.
Either way, how do you deal with your HECS debt now that you have it, and how to HECS repayments work?
Note: HECS debts were renamed HELP debts in 2006 but HECS is still the term most people use. If I use either HECS or HELP in this blog I mean the same thing.
Moving overseas with a HECS debt
Q. Do you have to pay HECS if you move overseas?
Yes. Until the 2016 financial year, most HECS debtors living overseas didn’t have to pay back anything, no matter how much they earned.
This is because HELP Repayments are based on your taxable income plus some add-backs (like fringe benefits, extra super, negative gearing etc). But it did not include income that wasn’t taxable and for a foreign resident, your foreign wages and a lot of your Australian income are not taxable.
So once you set up home overseas, your HELP Repayment Income was very unlikely to get to the $50k+ required to have to pay anything back as HECS.
Sadly for ex-pats, this is no longer the case.
The rules changed in 2017. Your non-resident foreign income (which includes your overseas salary) still isn’t taxable but it counts in working out your “worldwide income for calculation of overseas levy”. Therefore if your total income is above the HELP threshold then you have to repay your ATO HECS overseas.
If you didn’t realise the rules had changed or if you simply forgot to report your worldwide income please contact us for assistance in catching up.
HECS debts and unfinished courses: Can HECS debt be written off?
Q. I pulled out of my course partway through. Do I still have to pay for it?
Yes (with rare exceptions). When you enrol in a course you have to decide by the census date how you will pay for the course.
Back in my day (around the turn of the millennium), the census dates for an undergrad degree were 31 March for semester one and 31 August for semester two.
Let’s say the uni lumps you with a $5,000 invoice for semester one. You had until 31 March to either pay it upfront, agree to pay it via a HELP debt or defer/withdraw from the course.
If you withdrew on 1 April, it was bad luck. You had committed and were liable for the course.
Was the course not for you? Was it too much pressure? Did it prove to be useless in terms of launching a career? Bad luck. Other than in rare exceptions (keep reading…) you are stuck with the debt.
Q. Can I withdraw from a course after a census date under compassionate grounds?
Yes. If you have “special circumstances” then you can get out of your HELP debt. You don’t do this via the ATO or through your tax return, though, you need to contact the university. However, you generally have to do so within 12 months.
Being very cynical by nature, I would expect that if your debt is waived then the university has to reimburse the government and therefore they won’t make the process easy.
Note: until you sort out the debt with the uni, it will remain a debt and will be factored into any tax returns you lodge until the debt is waived. However, you may be eligible to defer the repayments. We can assist with applying for a deferral.
The employer didn’t withhold HECS
Q. I ticked the box on my tax file number declaration saying I had a HECS debt but when I did my tax, I found out that my boss didn’t take the money out. Do I still have to pay it, or is my employer liable?
You are liable. I call this a “not your fault but it is your problem” scenario which happens a lot in life.
It’s tough expecting that you had paid the right tax each payday only to end up with a multi-thousand dollar bill. You can’t avoid it but you may be able to defer it or simply pay it off by instalments by making a payment arrangement with the ATO.
HECS debts and dodgy universities
Q. I enrolled in a course with a VET FEE-HELP provider who turned out to be dodgy. The course was worthless and I never got any recognition for the subjects I did. I found out later that I had a HECS debt because of this course and that I will owe tax when I lodge my tax return. How do I fix this?
Q. I found out I have a HECS debt but I never enrolled in a course. I think I have been scammed.
The government have introduced “VET FEE-HELP Student Redress Measures”. Refer to the link below.
Note: this is not an issue we can sort out in your tax return. It’s not even an ATO issue, it’s a separate ombudsman you have to contact. We can’t help you with the ombudsman but we can help defer your HELP debt repayments in the meantime.
HECS and overdue tax returns
Q. I haven’t lodged my tax since 2015. I started a Masters degree in 2017 using FEE-HELP. Will I have to make HELP debt repayments in all the years or only in 2017 and 2018?
If your income is over the HELP repayment income threshold in 2015 and 2016 you will need to make a compulsory HELP repayment even though the debt didn’t exist in those years.
The way the law is written means that you have to repay your HELP debt based on the balance on 1 June of the year before you actually lodge. It is not based on your HELP debt balance when you should have lodged it.
If you have multiple returns and a HELP debt then we can definitely assist with that. Late tax is one of our specialties and we deal with these sorts of situations all the time.
You might be better off repaying your HELP debt prior to lodging any returns, or possibly lodging returns out of order to minimise interest and penalties. It depends on the situation.
Also, the ATO will often grant a deferral of compulsory HELP repayments where the repayment relates to a late tax return for a year prior to the commencement of study. Taking the example above, if the taxpayer was assessed for a HELP repayment for 2015 and 2016 there would be a strong chance of a deferral.
HECS debts and estates
Q. Does my HECS debt die when I do, or does it get passed on to my dependents?
HELP debts are cancelled when the debtor dies, under the current rules. That’s one way out of your debt… but I’d put that in the category of “hardcore tax planning”.
If any of these situations sound like you and you need help with your ATO obligations, please contact us to book an appointment today.