You’ve wracked up a healthy HELP, HECS or TSL debt getting that fancy-pants degree or trade that helped you move overseas to work in the first place. And we all know that the delightful Australian Tax Office (ATO) works off your Aussie income to decree how much you’re required to pay back each year. But there have been a few changes that are going to affect Australians who have been earning income overseas during the 2016-17 financial year.
Let’s go over a few of the basics first. Please note that all of the figures in this article are in Australian dollars.
REPAYING MY HECS/HELP DEBT
Once you’re deemed to be earning more than the compulsory repayment threshold, calculated by the ATO each year, you’ll need to begin paying back your student loans. Of course the threshold changes each year, so you’ll have to double check it on the ATO website in future.
For comparison purposes, the threshold for the 2015-2016 financial year was $54,126 however that has increased to $54,869 for 2016-2017. How do the boffins come up with that magic number?
They use these factors:
- your taxable income
- your fringe benefits (obtained from your payment summary)
- your total net investment loss (including net rental loss)
- your reportable superannuation contributions
- exempt foreign employment income
You pay back a percentage of your income, obviously that percentage increases as your income does.
Don’t fret if that kind of repayment is way beyond your means when it comes time to cough up. You can apply to defer the repayment on the grounds that it would cause you serious financial hardship. You’ll have to fill out the Deferring your compulsory HELP, HECS or Financial Supplement repayment form and provide your household income and expenditure as proof.
You can also pay off the debt in installments, if you don’t have the available funds to pay it off in one hit. Once you receive your tax bill from the ATO, you can log into your MyGov account and set up an appropriate “payment arrangement”, consisting of either weekly or fortnightly repayments.
HELP/TSL REPAYMENT CHANGES FOR AUSSIE EXPATS
This is where things start to change. If you’re lucky enough to have a Higher Education Loan Program (HELP) debt or Trade Support Loan (TSL), your compulsory repayment threshold will take your “worldwide” income from July 1, 2017.
It means any income you earn overseas will be counted as a whole with your Australian income, and if it eclipses the threshold, you’ll be charged the “overseas levy”.
WHAT ARE THE PRACTICAL RAMIFICATIONS?
If you’re already an expat, or are planning to live overseas for more than 182 days of the year, you’ll need to update your contact details with the ATO. To log into the MyGov website you’ll need access to your Australian mobile phone number, which can make it pretty annoying if you’re already overseas.
If that’s the case, you can create a new MyGov account, although you’ll need a different email address to the one you used on your previous account. Once you’re in you need to skip the step asking to set up the security code feature, as it does not accept overseas mobile numbers.
The second part involves knowing whether you’re an Australian resident for tax purposes or not. You can learn more about that in this excellent article by the Australian Expat Investor. If you are a non-resident for tax purposes, you’ll need to declare your worldwide income using your MyGov account, from July 1, 2017.
WHAT IS WORLDWIDE INCOME?
This one’s easy to answer: your worldwide income is the sum of any money you earned in Australia and overseas during the financial year. There’ll be a section in your tax return forms asking for your worldwide income, just fill it out and they’ll work from there. If it’s above that compulsory repayment threshold we talked about before, you’re up for the “overseas levy”.
Australian residents for tax purposes: Basically your worldwide income is compared against the repayment rates table above and you’ll have to pay the rate corresponding.
Non-Australian resident for tax purposes: This is where it gets a little tricky, so stay with me here. These figures apply for the 2016-2017 financial year, so they may change. When your worldwide income is:
- equivalent to or below $13,717, you need to submit a non-lodgment advice through the MyGov website.
- between $13,717 and $54,869, you need to declare your worldwide income through MyGov. You will not be charged the overseas levy.
- above $54,869, you also need to declare your worldwide income through MyGov, but you will pay an overseas levy.
HOW MUCH IS THE OVERSEAS LEVY?
The overseas levy is equivalent to the repayment rates listed above, after being converted from Australian to US dollars.
- The ATO’s foreign exchange rates.
- The MyGov website.
- The ATO’s overseas repayments page.
- Contact the ATO from overseas: +612 6216 3444 between 8am and 5pm AEST.
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