There have been some big announcements this week if you are carrying a HECS/HELP debt, but not everyone fully understands what it will mean for them with tax time just around the corner.
The announcement over the weekend relating to the HECS/HELP indexation will not change the HECS/HELP repayment amount in your 2023 tax return. Your HECS/HELP repayment amount in your 2023 return is calculated based on your adjusted taxable income; it is not based on your overall HECS/HELP debt balance.
The proposed change to indexation is to apply the lower of the Consumer Price Index or the Wage Price Index, with effect from 1 June 2023.
This means that you should receive an indexation credit that will reduce your outstanding loan balance. The indexation rate applied on 1 June, 2023 was 7.1 per cent. Under the new proposal, this would be reduced to 3.2 per cent.
After the relevant legislation is passed, the revised indexation rates will be automatically applied by the Australian Taxation Office (ATO) to your loan.
You will not need to action anything for this change in indexation methods to be applied to your HECS/HELP loan balance.
The indexation rate to be applied on 1 June, 2024 is 4.7 per cent and under the proposal, this would be reduced to 4.0 per cent.
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