For Australians pursuing higher education, the HECS-HELP loan system offers a way to fund tertiary studies and pay back the debt once their income reaches a certain threshold. But what happens if you move overseas? Are you still required to repay your HECS-HELP debt? Here’s everything you need to know.
Understanding HECS-HELP Debt
HECS-HELP is a government loan that helps eligible Australian students cover the cost of university tuition. The debt is repaid through the tax system, and repayments are based on your income once it exceeds the minimum repayment threshold, which adjusts annually (e.g., $51,550 for the 2023-24 financial year).
Moving Overseas: Your HECS-HELP Responsibilities
If you’re planning to move abroad, you’re still responsible for your HECS-HELP debt. In 2017, the Australian government introduced changes to ensure that individuals living overseas are treated the same as those residing in Australia when it comes to student loan repayments.
Key Requirements for Australians Living Overseas:
- Notify the ATO
- If you intend to live overseas for more than six months, you must notify the Australian Taxation Office (ATO) within seven days of leaving the country. Your accountant Melbourne, like Nobel Thomas, is able to notify the ATO for you if you need assistance.
- Report Your Worldwide Income
- You are required to report your income earned overseas to the ATO annually. This includes any employment income, business income, or other taxable income you earn in another country. Please note that this does not necessarily mean that you will pay tax in Australia on income earned overseas. The ATO will need to know this to determine how much to charge you in HECS – HELP repayments for the year.
- Repay Based on Income
- Your HECS-HELP repayments will still be calculated based on your worldwide income. The same income thresholds and repayment rates that apply in Australia are used for overseas residents. If you need help to calculate whether you will need to make HECS-HELP repayments, please contact your accountant Melbourne.
How Are Repayments Calculated?
The repayment rates for HECS-HELP debt are income-dependent and range from 1% to 10% of your income. If you’re overseas, you’ll need to lodge an Overseas Travel Notification with the ATO and report your income using the Non-Resident Foreign Income Tax Return form. If you need help to complete these forms, please contact your financial advisor Melbourne.
Note that the ATO uses a formula to calculate your repayment amount based on your reported income. If your income is below the repayment threshold, you won’t be required to make repayments, just as if you were living in Australia.
Consequences of Non-Compliance
Failing to notify the ATO about your overseas status or neglecting to report your income can result in penalties. These might include:
- Late lodgment penalties.
- Additional interest or administrative charges on your debt.
- Potential legal action for continued non-compliance.
Do You Pay in Australian Dollars?
Yes, repayments are made in Australian dollars. If you earn income in a foreign currency, it must be converted into AUD when reporting to the ATO. Exchange rates can impact the amount you’ll repay, so it’s worth considering fluctuations in currency values. Also, it maybe worth considering using a provider that charges low conversion fees for converting your currency. Please contact your financial advisor Melbourne for a list of low fee currency conversion providers. One example is Airwallex.
Strategies for Managing HECS-HELP Debt While Abroad
- Stay Compliant: Always notify the ATO about your move and ensure timely reporting of your income.
- Plan for Exchange Rates: Be mindful of currency conversion when budgeting for repayments.
- Monitor Income Thresholds: Keep track of annual changes to repayment thresholds and ensure your income aligns with your repayment obligations.
Final Thoughts
Leaving Australia doesn’t exempt you from repaying your HECS-HELP debt. The government’s system ensures that all Australians, regardless of where they live, contribute to the repayment of their student loans once they earn enough income. Staying informed and compliant is essential to avoid penalties and manage your financial responsibilities effectively.
If you have questions about your HECS-HELP obligations overseas, consult the ATO’s website or speak with a financial advisor Melbourne to ensure you’re meeting all requirements.
