Recent government changes to HELP debts are set to impact millions of Australians, especially when it comes to their tax returns. If you have a HELP debt, it’s essential to understand how these updates affect your financial situation. When you lodge your tax return, any outstanding HELP debt is assessed based on your Repayment Income. This includes taxable income, fringe benefits, super contributions, and other income sources. 

What’s Changing?

1. New Repayment Threshold

From the 2024-25 financial year, the income threshold for mandatory HELP debt repayments will increase from $54,435 to $67,000.

• Repayments will now be calculated only on income exceeding this threshold, not your entire income, providing more financial breathing room.

2. Lower Indexation Rates

• The 2023 indexation rate dropped from 7.1% to 3.2%.
• The 2024 indexation rate reduced from 4.7% to 4%

3. 20% Debt Reduction

A one-time 20% reduction will be applied to all outstanding HELP debts before the next indexation on June 1, 2025. This will significantly lower the total debt balance for millions of Australians.

Visit ATO for a detailed explanation of these changes.

How Does This Affect Your Tax Return?

• Lower Repayment Amounts: With a higher repayment threshold and reduced indexation rates, many taxpayers will see a decrease in the amount deducted for HELP debt in their tax return. This could result in increased disposable income.
• Potential Refunds: If you’ve repaid your HELP debt after the 2023 or 2024 indexation but before these changes, you may be eligible for a refund on the overpaid indexation amount. Keep an eye on updates from the ATO regarding automatic refunds.
• Updated Tax Obligations: Adjustments to your HELP debt balance and repayment calculations may change your tax liabilities for the 2024-25 financial year.

What Should You Do Next?

• Review Your HELP Balance
  Log in to your myGov account to check your current HELP debt status and ensure it reflects any recent changes or reductions.
• Update Your Income Records
  Ensure all income sources are accurately reported in your tax return to avoid overpayment or miscalculation of your HELP debt obligations.

At MKG Partners, we specialise in helping individuals navigate complex tax obligations and maximise their financial outcomes. Whether you’re seeking clarity on how these changes affect your tax return, managing repayments, or planning ahead, our team is here to guide you every step of the way. Contact us today to discuss your options.