HECS-HELP debts taken on by Australian students may not have interest charged but they are indexed each year. Indexation maintains the real value of the loan by adjusting it in line with changes in the cost of living according to the consumer price index (CPI). On 1 June each year, indexation is applied to the part of an accumulated HECS-HELP or training loan that has remained unpaid for more than 11 months.
Indexation has risen sharply over the last three years, and steadily over the last decade. This year’s indexing will be the highest in recent times and lengthen repayment period for students with a debt. The amount a student pays will not increase due to this.
The government does not profit from indexation as it is designed to keep the loan value equal overtime.
Compulsory repayments are made each year from an individual's tax return. The repayment amount is based on the individual’s income bracket, according to the ATO’s thresholds, and increases as the salary increases.
Is paying off your HECS-HELP worth it?
The Australian Bureau of Statistics recently revealed the CPI for the march quarter and in turn the annual figure of 7.0%. HECS-HELP loans are adjusted according to CPI therefore the average loan will increase by $1800 this year. Making voluntary repayments will come down to personal circumstance. Not everyone has money at their disposal to make voluntary contributions, but it can be worthwhile, especially to lessen the amount added to the loan each year.
How to make a voluntary contribution
Voluntary contributions can be made via the Australian Taxation Office (ATO) through the myGov website, and through BPAY or credit card. Checking an outstanding balance can also be done through the myGov website.
Training and study boosts
Small and medium businesses (with annual turnover of less than $50 million) will be able to make new business deductions thanks to the government’s training and technology boosts.
Businesses will have access to 120% deduction for eligible expenditure on external training of employees by providers registered in Australia, from 7.30pm AEST, 29 March 2022 until 30 June 2024. They can also access 120% deductions to support the uptake of digital technologies from 29 March 2022, but this bonus only runs until 30 June 2023. One year less than the training boost.
These bonus deductions are able to be claimed in full in the 2022-23 tax return. There is eligibility criteria and exclusions around what deductions can be made. Businesses can continue to deduct expenditure that is ineligible for the bonus under existing law. There is an annual cap of $100,000 in each qualifying year.
This is still subject to law passing through parliament. To find out more, read our extended blog here.