If you’re hoping for a little Christmas bonus this year it might be worth logging in to your MyGov account.
If you have a HELP debt (formerly known as HECS) you should see two credit entries, both dated 11 December 2024, saying “amendment to indexation”.
These are back-dated adjustments to reflect changes recently passed to limit the annual increase applied to students’ outstanding HELP liabilities.
Since 1989 the government has charged students to study, allowing them to borrow for the cost and repay the liability once they start earning a sufficient level of income. An annual inflationary increase is applied to HELP debts so that they increase in line with the consumer price index (CPI). The historical average annual increase is 2.8% and was always thought of as “cheap interest” for students.
However, in the post COVID affected world, inflation hit 7.1% in 2023 and 4.7% in 2024, causing a shock for students who suddenly saw their debts escalating excessively.
To appease these co-ed constituents, the government rushed through laws to limit the annual indexation to the lower of CPI and the Wage Price Index (WPI) – a slightly different measure that often lags conveniently behind inflation.
As a result, the 2023 annual indexation on HELP liabilities has now been reduced from 7.1% to 3.2% and the 2024 indexation rate from 4.7% to 4%.
If you have the average HELP liability of around $27,600, you can expect your credits to be somewhere around $1,200.
If you have since paid off your HELP debt, the ATO should send any refund to your nominated bank account, unless you have other tax debts, in which case they will keep it.
The government has announced further changes to HELP, but subject to Labor’s re-election and then being able to gain political support to make such changes in time. If that all happens to go to plan, students can expect to see their HELP balance reduce by 20% come June 2025. This would cut $5,520 off the average $27,600 HELP balance.
But remember this is not yet law, and the announcement is a little short on detail, leaving students unsure as to whether they should pay down existing HELP debts or not.
A further announcement proposes amendments to the thresholds at which HELP debts will be repaid, reducing the annual commitment for students. The proposal increases the minimum threshold from $54,435 to $67,000 from July 2025 and applies a marginal rather than a fixed rate. While this may sound like welcome news, it means HELP loans will be paid off much slower, subjecting students to greater inflationary increases in future years.
by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au