The Community Business Bureau (CBB) wholly owns The Salary Packaging People (TSPP). Explore the CBB Website to find out additional information on salary packaging and novated leasing and other services.

Salary packaging and your HECS/HELP debt

Make no mistake, salary packaging reduces your taxable income. By accessing your pre-tax pay, you can use some it to pay for your life’s expenses and reduce the tax payable on your remaining pay. The gross value of the amount you salary package each year is included on your end of financial year income statement as ‘Reportable Fringe Benefits Amount’ (RFBA). The RFBA is used when the Government determine some benefits that are available to you as well as how much you need to repay for your HECS/HELP debt. So, the sum of your remaining gross salary and the RFBA will determine how much your HECS/HELP repayments are at the end of the financial year. It’s important to know this at the start of each financial year, as nobody wants the ATO to come knocking for extra tax.

Will I have to make HECS/HELP debt repayments?

Whether you already have a salary packaging arrangement or want to set one up, get in touch with your salary packaging provider. You can nominate the amount you want to transfer each pay cycle from your pre-tax salary to your card. When your deduction happens, the amount you’ve specified gets loaded onto your card for you to spend as you need. The maximum amount you can allocate will depend on your specific salary packaging benefit (and entitlement), such as Meals & Entertainment or Living Expenses.

Will I have to make HECS/HELP debt repayments?

When you do your tax return, the ATO will calculate what they refer to as your ‘Repayment Income’ (RI) amount. This is the combined amount of your Taxable Income, RFBA, Reportable Superannuation contributions and any exempt foreign employment income. The RI is then used against a threshold table to calculate how much your minimum HECS/HELP needs to be. The tables for the compulsory repayment threshold changes every year. The first RI level is as follows:
For the 2021-22 income year, it is $47,014.
For the 2022-23 income year, it will be $48,361.

If your RI is above these amounts, you will pay minimum of 1% of your RI as a HECS/HELP repayment.

It is a common misconception that if you earn under this threshold and are benefiting from salary packaging, you won’t need to make HECS/HELP repayments. In fact, your adjusted repayment income amount may tip you into the compulsory repayment threshold. To check if you are impacted, you can ask your accountant or salary packaging provider. They can help you calculate whether or not you should be having more tax deducted from your current salary, and exactly how much more you should be contributing to avoid bill shock at tax time. HECS/HELP repayments, voluntary or compulsory, always come out of your pre-tax salary. You do not and should not be paying tax on these repayments.

Is it worthwhile salary packaging if I have a HECS/HELP debt?

Salary packaging is always worthwhile. Even if a salary packaging arrangement tips you into the RI threshold, or puts you into a higher repayment bracket, you won’t suddenly be forking out massive repayments. The ATO understands that people who are just starting out already have to combat high living costs on a low range salary, so compulsory HECS/HELP repayment percentages are set at fair increments. The current repayment percentage rate for the lowest income threshold – $47,014 – $54,282 – is just 1%. If you have a salary packaging arrangement, you will always be saving on tax with or without a HECS/HELP debt. While calculations vary depending on your income and existing HECS/HELP debt, even at the low end of the income scale, you can expect to save thousands off your annual tax bill through salary packaging.

Report your pay rise

If you get a novated lease as part of a salary packaging arrangement, your salary packaging provider can supply a fuel card through a provider such as Motorpass. When you have a novated lease, your car repayments don’t just pay off the car – each repayment goes towards a range of on-road costs, including your fuel. Because these repayments come from a combination of your pre-tax and post-tax salary, you could save as much as 30% every time you fill up. Having a fuel card is particularly satisfying for anyone who has dreaded pulling up to the service station or is worried about the rising cost of fuel. Read more about saving on fuel with novated leasing here.

Make more with The Salary Packaging People

We’re always trying to find ways to make your money go further. Feel free to chat with us about your HECS/HELP debt and the benefits of salary packaging. If you’d like to know more about salary packaging for yourself or your employees, get in touch online or call 03 5229 4200.

Disclaimer: Please be aware that the information in this article is general in nature and may not be applicable to your personal circumstances. We highly recommend that you seek independent financial advice before entering into any salary packaging arrangement. The above information is written on the basis that you are entitled to certain tax exemptions associated with employment within not-for-profit, public health, charity, health promotion charity sectors. As a result some or all of the above information may not be relevant to you.