HECS Voluntary Payment/Adjustment Timing

michael_123 on 14/05/2023 - 07:28

Morning,

TDLR
If I make a voluntary payment towards which pays off my HECs now, I avoid indexation and save $210?

I am due to pay off my HECS debt this financial year. Am I correct in my current understanding:

*the payments taken from my pay fortnightly don't actually come off my HECS until I complete my tax after July 1
*my current HECS balance will increase by ~7% on June 1

So let's say my current balance when I log in to ATO is $3000 and my fortnightly contributions are $300. If I were to make a voluntary payment of $3000 now my balance would reduce to $0, I would not be adjusted come June 1 and I would get 26x$300=$7800 back at tax time?

The alternative would be just to leave it, but my HECS would increase by 7% ($210) then at tax time I would receive $7800-3210=$4590…

Am I correct? Many thanks.

Financial HECS-HELP

Comments

  • original15 on 14/05/2023 - 07:37
    +7

    I haven’t checked your math but the assumptions seem correct. The only thing is if you do proceed and pay off hecs, you can tell your employer once this occurs so that they stop taking it from your pay, you don’t need to wait until a new financial year

    • jjjaar on 14/05/2023 - 08:02

      Agree with all of this.

    • michael_123 on 14/05/2023 - 08:28

      Thank you, was not aware of this.

  • stirlo on 14/05/2023 - 08:32

    You are correct.

    However $3000 @ 5% pa interest will earn you an extra $30 in interest between now and tax time so the saving is only $180.

    • RMBC on 15/05/2023 - 07:42
      +2

      Less tax on the interest, so the saving is greater

  • TEER3X on 14/05/2023 - 08:33

    Should've paid it off a few weeks ago with the prepaid cards deals, saving you ~7%

  • SnowDragon on 14/05/2023 - 15:50
    +2

    You are correct - I did the same thing earlier this year.
    Paid remaining balance and submitted this form to my employer (just need to tick no for question 6).

    HECS will no longer be deducted from your pay and all contributions from your employer will be in your tax return.

  • frostface on 14/05/2023 - 20:10
    +1

    Is there any benefit in telling your employer you’ve paid off your HECS when you really haven’t, then putting that extra money into a savings account earning 5% interest account, and then putting it towards your tax return?

    • Cheapskate Paul on 14/05/2023 - 20:56

      The benefit of NOT doing this is that you won't be lying on an ATO document. They tend not to like this!

      • taradavey on 15/05/2023 - 09:32
        +1

        The document isn't declaring whether you have HECS debt or not.
        The document is you giving permission for your mandatory HECS contribution to be taken from your pay and be contributed to the ATO.

        So doing what the above comment asks isn't lying to the ATO.
        If somebody works for themself pays themselves, there is no one to submit this document to. They're not lying to the ATO.

        • Cheapskate Paul on 15/05/2023 - 09:40

          From the ATO website:

          Advising your employer
          You must advise your employer if you have a study or training support loan. Under the pay as you go (PAYG) withholding system, your employer will withhold an additional amount from your salary and wage income to cover your compulsory repayment.

          Advise your employer by ticking the relevant box on one of the following forms that applies to your situation:

          If you're starting a new job, complete a Tax file number declaration (NAT 3092) and include your loan type when asked to do so.
          If you are already working and being paid, complete a Withholding declaration (NAT 3093) and include your loan type when asked to do so.
          When you pay off your loan in full, complete a new Withholding declaration (NAT 3093) to advise you no longer have a debt. Update your loan type when asked to do so.

          • taradavey on 15/05/2023 - 09:43

            @Cheapskate Paul: The PAYG system is not mandatory!

            Again, people who work for themselves and pay themselves do not use it.

            It is only mandatory to pay the minimum amount - not to do so with PAYG.

            • Cheapskate Paul on 15/05/2023 - 09:54

              @taradavey: I'm not sure why you are talking about people who work for themselves. frostface clearly has an employer, so the PAYG system is indeed mandatory for them.

      • Korban Dallas on 21/05/2023 - 23:58
        +1

        I pay all mine at the end of the year. 8k last year. I have until March and if I pay it off earlier I get that credited into my account.

        Been doing this the last 5 years. No issue with the ATO.

    • taradavey on 15/05/2023 - 09:29

      By telling your employer you have HECS to be paid, they are telling payroll to add that extra deduction to go towards HECS debt.
      If you manually pay the ATO the minimum required payment for your earnings bracket, you are essentially doing the same thing - just not out of your weekly pay.

      So to answer your question - the benefit of this would be that you would have the interest accrued to go towards this payment.
      So if you have the means and the ability to save the money, I would think this is the smarter way to go.

      • Cheapskate Paul on 15/05/2023 - 09:50

        frostface asked about telling their employer that they had paid off their HECS debt when they had not. They are NOT self employed. They are required to TRUTHFULLY declare that they have a tax debt using ATO forms NAT 3092 or NAT 3093.

        • taradavey on 15/05/2023 - 10:16

          They may be requried to declare but PAYG is not mandatory.
          I've declared it to my employer but am not paying PAYG

          • Cheapskate Paul on 15/05/2023 - 10:21

            @taradavey: So if they have to declare, do you agree that it would be best to tell the truth, and therefore have HECS repayment deductions taken from their salary?

            • taradavey on 15/05/2023 - 10:50

              @Cheapskate Paul: No as I said it's not mandatory to have HECS repayment deductions (PAYG) to come out of your salary.
              As long as they are paying the minimum repayment they are not doing anything wrong.

              • Cheapskate Paul on 15/05/2023 - 10:54

                @taradavey: I disagree, but accept that I can't convince you. I just hope that @frostface does not take your advice.

                • taradavey on 15/05/2023 - 12:43

                  @Cheapskate Paul: PAYG is not mandatory for HECS debt contributions.You do not have to pay it out of each individual pay. You have to pay it at the end of the financial year.

                  Whatever you believe is fine, I am an employee, have disclosed that I have a HECS debt, and do not pay through PAYG, I pay once yearly from my own bank accounts. My account has advised me that the way I am doing it is perfectly legal, and the ATO has never made any contact saying that the way I am doing it is not legal.
                  That's fine if you don't believe me! But I will continue doing as I have been, and telling others that they can do the same.

  • The Hawk on 15/05/2023 - 09:52

    I know people who have paid off their HECS/HELP debt and never updated that for so it's like mandatory savings with a giant bonus at tax time. Sure they could earn interest (as is the ozbargain way), but this works for them.

    As for not telling your employer when you DO have a debt, I have to wonder if the ATO actually cares as long as you make the required payment at the necessary time or if some computer says you were a bad boy :P

    • basketcase86 on 28/05/2023 - 13:24

      Hmm, if that works for them great but that is a terrible way to "save" as a grown adult. :S

      • taradavey on 29/05/2023 - 10:20

        It may not be the most beneficial, as you don't acrue interest and do not have access to the money, but if it works for someone it's not 'terrible'.
        Some people have read shopping addictions, and real issues saving money (obviously it's common, as many people are in severe credit card debt) so if this is the only way they can ensure they will actually save their money, power to them.

        • basketcase86 on 29/05/2023 - 11:32

          Surely there are savings accounts that lock your money in?

  • Homr on 29/05/2023 - 22:16

    I just did bpay 40k to ATO right now, will it be processed in mygov by 31st May?

    • taradavey on 30/05/2023 - 11:05

      Maybe but maybe not. Last year when I did my payments once it took a few weeks to show up. But I did one at the start of May and I only thought to check like a week later, and it had already gone through.
      Fingers crossed for you.

      • basketcase86 on 30/05/2023 - 18:28

        Did min last Friday. Would be dirty if it didn’t count. Will be calling up tomorrow 31st.

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