I want to pay off my HECS/HELP loan quicker. I know that I can make voluntary repayments but that amount isn't tax deductible. Ideally I want to bump down my pretax income to 37k so I avoid the 32.5% tax rate.
Am I able to ask my employer to allocate a greater sum of my pre-tax income to my HECS debt so that I'll pay it off quicker?
It may be worth paying off your HECS debt prior to indexation in the final year of paying it off, as the debt gets indexed on 1 June, but you don't actually make a payment contribution until you lodge your tax return after 30 June.
It may save you 1.5% off your final repayment by paying it a month in advance then claiming the tax back that you would've paid from that financial year. Sure, this isn't much ($60 on $4,000 of repayment) but if you can guarantee a 1.5% return on investment in under 2 months that's pretty decent.
Damn that's unfortunate. If I could use pre-tax income to pay off HECS, I'd be taking home more money in 5 years time than if I'd left it to payroll to take X amount every week or fortnight.
I don't have any loans at the moment and I feel that my rainy day fund is adequate at this point in time.
I might want to go back to uni in the future to pursue another career field. Would you recommend making some voluntary HECS contributions in the mean time or just let payroll take it as time goes by?
You can almost certainly make more money investing any savings yourself than paying HECS where the interest is only nominal. So leave the HECS debt alone and go buy some Shares/Bonds/Property/Term Deposits or if you really must Crypto!!!
Wise words and excellent advice. Thanks mate, will defs look into investing.
Won't make any difference if your Employer pays more of your HECS. It comes out of your post-tax income already.
Yeah that really sucks. I'd be taking more cash home in 5 years time if they'd allow me to pay HECS off using a good chunk of pre-tax income and consequently bumping me down to a pre-tax income of 37k p.a for 2 years than paying out of my own pocket. It'll be nice if the government let people do this, they'd see a lot of their HECS money returned to them.
You're essentially asking for the equivalent of a tax deduction for your hecs… so no mate,no.
Although i do think they should bring back the bonus scheme for voluntary payments.
I think HECS is treated as an additional tax on your income, even the compulsory payments are not tax deductible/don't come off pre-tax income. Best way to get your pay under the threshold is to claim allowable deductions at tax time.
able to ask my employer to allocate a greater sum of my pre-tax income
You got it mixed up. See, you voted in parties that allow businesses to spend money before their income is assessed to be taxed and if they're massive businesses they pay less than 2% tax on whatever's left over.
The same parties tax your money before you spend it and then tax you at way more than 2%.
Are you going to continue to vote in Liberal and Labour which delivered this shitful situation that results in you losing thousands of dollars to tax while the countries largest businesses pay almost nothing?
A vote for Liberal or Labour is a vote to continue this situation where you get screwed so rich people get richer.
Can you propose a credible alternative?
Diji1 comes out with don't vote Liberal or Labour(sic) but never says who they think we should vote for.
allow businesses to spend money before their income is assessed
So a business is taxed on sale income and can't deduct expenses like rent, wages, stock?
If you want to reduce your taxable income, get your employer to make voluntary pre-tax contributions to your super. You can deposit up to $25,000 which will only be taxed at 15% and will earn a much higher rate of interest than the tiny indexation applied to your HECS debt each year.
Problem is that I won't be able to access my super until I turn 60. It'll be much harder to save up for a house deposit with less income. I'd prefer to have more take home pay at the moment and consider throwing 25k a year into super if I ever land something that pays 6 figures a year.
Now that there's no bonus for paying off HECS early, the only time it's worth doing is in the last year you'll have any debt left. E.g. you still have $500 owing and you know that your employer will withhold at least this much. Your employer won't actually give it to the ATO until after 30 June BUT the ATO will apply the indexation on 1 June. So by the time your employer tries to pay off your debt, the sum has increased to ~$510. If you want to save a few bucks, make a voluntary payment of the exact amount in May and get back in your tax return however much extra your employer gave to the ATO. (You still want to tell your employer that you no longer have a HECS debt so they can withhold at the lower rate but it's unlikely they'll let you have all the extra withheld from earlier pay packets.)
the only time it's worth doing is in the last year you'll have any debt left
Good idea and noted. Thanks!
Or don't tell your employer about your HECS debt. Put the extra money into additional super contribution, repaying loans/mortgage, an investment or just into savings accounts e.g. 2.87% at Ubank. Then just pay your HECS as a lump sum with your tax return every year. Indexation every year is usually around half of the interest you can earn from just putting it into a savings account. ~1.5% last 2 years.
I believe you have to declare the truth in your Tax File Number declaration to your employer.
You'll also be paying income tax on your 2.87% earnings at Ubank, so after a tax rate of 30% that's only a NET 1.7% gain.
I've considered doing this myself. I've heard you can get away with it only for the first year because the ATO then tells your employer that you've got a HECS debt.
I don't know why the ATO would care, so long as they get their money. I guess they just don't trust the average punter to have that much money lying around when tax time comes.
remember the old days (not the free teriary education - thanks Gough Whitlam) when they -HECS dudes- offered incentives to pay your HECS debt. e.g. 15% discounts for bulk payments.
e.g. 15% discounts for bulk payments.
Please bring this back :(
Get a higher paying job.
This. It's also Joe Hockey's solution to everything.
Unfortunately, the body has withered into a pathetic state and prostitution doesn't pay as good as it did 30 years ago.
I have work take an extra amount every pay. It's mostly to offset the bonus we get every year. The last bonus took me over the HECS amount (by $42) - ended up having to pay back around 2400 come tax time
I don't intend to sound grumpy but…. Pay off your debts post tax like everyone else. Other Tax payers should not be held part portion accountable for your HECS, which in a roundabout way is what you are asking for.
On one hand I disagree with you, since many of these "other tax payers" received free tertiary education and are in no position to complain. But on the other hand, HECS is far too widely offered, such that courses that in no way offer any form of financial benefit to society are incurring millions of dollars of debt.
The tax payer bearing the debt of HECS for engineering, teaching, medical fields, accounting etc is perfectly fine. But for gender studies and the like? Please.
suck it up , i paid all mine after 2 yrs of finishin uni #sux2bU
see? doesnt feel good to troll and joke on ppl's serious thread isnt it?
Grow up.
No, you can't use pre tax income to pay any debt (HECS or otherwise)
This is a poor idea. You should never pay off your HECS/HELP debt, it is the cheapest loan you will ever get. You are far better paying off any other debt you have (Credit Cards, Personal Loans, Car Finance, Homeloan) first then saving 3-6 months pay as a rainy day fund before even considering it.
Your income doesn't seem particularly high so even if you have done these things I'd then start saving for a house, it will be a lot harder to pay a larger homeloan with no HECS debt than a smaller homeloan with a larger HECS debt.
Also there's no real harm in hitting the 32.5% bracket, Tax brackets are only on marginal earnings so you only pay 32.5% on the income above $37K, paying the higher rate wont cost you any extra.