Possible Negative HECS Indexation Rate Interest Rate 2021?

What will the HECS indexation be in 2021

Can the interest rate be negative as we had negative CPI in June?

I need to pay off my HECS, thus should I pay before 1 June or after 1 June?

Thanks in advance

Poll Options

  • 1
    negative indexation
  • 46
    positive indexation
  • 3
    Who cares

Comments

  • While it is possible to go negative, it looks highly unlikely based on the figures.

  • It can in theory be negative , if the CPI is negative for the financial year, but i dont think it will be for this financial year

    Best time to make a voluntary repayment

    If you plan to pay off your total loan balance with a voluntary repayment, it's best to make your repayment before you lodge your tax return or worldwide income.

    If you lodge your tax return or worldwide income before your voluntary repayment is credited to your account, a compulsory repayment or overseas levy may be included on your notice of assessment. You may also benefit if you make a voluntary repayment before indexation is applied on 1 June.

    If you intend to make a voluntary repayment before indexation is applied, it is important to allow enough time for the payment to be received and processed by us before 1 June.

    https://www.ato.gov.au/Individuals/Study-and-training-suppor...

  • Just wait until April 28 when the March CPI report is released. The indexation rate will be calculated off that data.

    (Not entirely sure but if the laws are written like the alcohol tax laws, indexation will never be negative)

    CPI in the year ending Dec 20 rose 0.9%. Unless there's been a significant decrease in cost of living in the last 3 months, CPI is going to be positive for the year ending Mar 21.

    Pay before June 1, as indexation occurs on June 1.

  • I can't see how it'll be a negative CPI. Everything is definitely more expensive than pre-covid, foods increased, rents have increased, houses have increased.

    • And that might be the only reason CPI is still positive. Housing price is going to skew that a fair bit considering housing makes up 23% of the CPI data.

      • I don't think house prices are included in CPI at all.

        • It makes up a portion of the housing section of the CPI, the two largest components under the housing category (the largest category) are cost of new dwellings purchased by owner-occupier and rent. These two components make up about 1/6th of the CPI basket overall.

          Mortgage repayments on the principle amount are also included for certain dwellings (probably owner-occupier, but couldn't find confirmation on that)

          • @Trance N Dance: Where are you finding this information? Housing is not considered in CPI calculations. It is excluded consumption because it is capital expenditure.

            edit: I stand corrected…RBA

            This is sort of confusing. New builds are included in CPI but the land is not. Established homes also not included.

  • The Index rate is over the full year, not just the June CPI.

  • The average CPI for last three quarters is around 0.43% percentage. The March CPI would need to be less than -1.3% for your HECS indexation to go backwards. I don't think that's the case. My bet is the March CPI will be around 1%, so HECS indexation will be around 0.6%.

    As to whether to pay before 1 June indexation, it depends if you were going to invest that money anyways to beat that 0.6% rate, not just hold off it because it might be negative. You have to make that analysis yourself.

    • More like 1.X%
      Quarter ending Jun 20 saw a -1.9% decrease, quarter ending Sep 20 saw a 1.6% increase, quarter ending Dec 20 saw a 0.9% increase so year ending Mar 21 will see roughly 1x0.981x1.016x1.009x1.001 = 1.0157. Approximately 1.57% assuming 1% growth in the quarter ending Mar 21.

      • You using quarterly change figures. The definition uses accumulated CPI / index number

        Using your approach, last year HECS indexation would be 1.006x1.005x1.007x1.003=1.021 approximately 2.1%, which is off from official 1.8%

        Dec20 index number was 117.2. If Mar21 quarter CPI is 1.0%, then it's index number would be Dec20 x1.01 = 117.2 X 1.01 = 118.4. the HECS indexation would be (114.4 +116.2 +117.2 + 118.4)/ 463 = 1.0069 .

        So about 0.6%-0.7% not 1.X%

  • Can someone post a resource to understand this a little more with the neg indexation?

  • Based on today's release with the quarterly CPI figure of 0.6% and year-end CPI figure of 1.1%, the HECS indexation factor will be about 0.6%/0.7% if calculated using the formula. I'm sure the government will release the actual figure in due course.

    My guess of quarterly CPI was off by 0.4%. bummer.

    OP, maybe pay off HECS before 1 June?