If you’re one of the many Australians with a study or training loan balance, such as a HELP debt, you may want to start thinking about reducing your balance to avoid a big tax bill come 2023 tax return time. While there’s no interest charged on these loans, indexation is added on 1 June each year, based on the consumer price index (CPI). With inflation rates on the rise, it’s expected that individuals with study and training loan balances will see a larger than normal adjustment to their loan balance this year.
To ensure you’re not caught off guard, it’s worth taking a moment to check your loan balance and consider these tips:
- Let your employer know if you have a study loan or if you’ve recently started studying. This is important because your employer is required to withhold additional tax from your pay to cover your compulsory HELP repayment.
- Check how much your employer is withholding from your pay. If you think it’s not enough to cover your compulsory repayment, you can ask your employer to increase the withholding amount.
- Make voluntary repayments to reduce your loan balance. Indexation is applied to your loan on 1 June, so making a voluntary repayment prior to this date will help reduce the balance that indexation is applied to. Keep in mind that it may take a few business days for the ATO to receive and process the payment.
It’s important to note that indexation won’t apply to your study and training loan if the balance is nil on 1 June. Additionally, any loan debt over 11 months old will be subject to indexation.
For the 2023 financial year, the compulsory repayment threshold is set at $48,361. If you earn over this amount, your compulsory repayment will be worked out and included on your notice of assessment when you lodge your tax return.
By following these tips, you can reduce your study and training loan balance and avoid a surprise tax bill. For more information on reducing your loan balance and staying on top of your finances, check out our blog post today.
