How Do The New HECS & HELP Debt Changes Affect Aussie Expats?
How Do The New HECS & HELP Debt Changes Affect Aussie Expats? – Today we want to run through something that we’ve been talking about for the last 12 months and that’s the upcoming deadline with respect to the HECS, HELP and TSL debt changes that are occurring.
As of the 1st of July 2017, a new regime is going to be introduced for those who are classified as non-residents who have student debt back in Australia. What we want to run through today is how these changes are occurring and how they may affect you?
The first key one is for those who are about to become an expat. As soon as you move overseas you have seven days to notify the ATO of your new overseas address details. Please also ensure you turn off your security functions on your myGov account as if you are moving overseas and you will not have the same mobile number that you had in Australia, the two step authentication may fail and you may find yourself locked out of the account.
For those already overseas, you have until the 1st of July 2017 to notify the ATO of your overseas contact details. Let’s run through some of the changes and how they may affect different expats and different circumstances.
If you’re a non-resident for tax purpose with a HECS or HELP or TSL debt, you will need to declare your worldwide income using the online myGov services. You can also engage an Australian tax agent to submit this on your behalf. Your worldwide income is any Australian and foreign sourced income. If this is above the minimum HELP, HECS or TSL repayment thresholds, you will be required to make a compulsory repayment known as an overseas levy. The overseas levy is calculated on HECS, HELP and TSL debt repayment thresholds.
Currently the minimum threshold is for $54,869.00 Australian dollars or the overseas equivalent and the payment threshold kicks in at 4%. However, if you do not earn over this amount, this doesn’t mean you’re precluded from these upcoming changes. If your income is at or below $13,717.00 Australian dollars for the 2016/17 income year, you will need to submit a non-lodgement advice through the myGov portal. If your salary is above $13,717.00 Australian dollars per year and below $54,869.00 for the 2016/17 income year, you will need to declare your worldwide income to the ATO through the myGov portal.
An overseas levy will not be raised as you are below the minimum payment threshold. If your salary is above $54,869.00 Australian dollars for the 2016/17 income year, you will need to submit your worldwide income through the myGov portal. An overseas levy will be raised on your worldwide income as it exceeds the minimum repayment threshold and you will need to repay this amount.
If you did not earn more than $13,717.00 Australian dollars you will need to submit a non-lodgement advice. A non-lodgement advice is a document lodged in lieu of a return. This document tells the ATO that you will not be lodging a return as you are under the 25% minimum HECS, HELP and TSL repayment threshold. When you’re converting currency, all foreign income deductions and foreign tax paid must be converted to Australian dollars before being included in your return. The rate of conversion will be the average exchange rate for the Australian income year.
The ATO is currently updating their foreign currency converting tool, which will help you achieve this. If you require a foreign exchange rate of a currency that is not listed with the conversion tool, you may use a reasonably externally sourced exchange rate for the currency for example, from a bank.
When you’re declaring your income to the ATO you will have three methods that you can use to declare your worldwide income to the ATO. The first is a simple assessed method and this is a method that you will require to provide your gross amount of foreign income for the income year and state the occupation from which you derive most of your income from. A standardised deduction will be applied to reduce your foreign income based on your occupation. The standardised deduction is calculated on average of deductions claimed for that occupation from the previous income year.
The second method is the overseas assessed method. This method will allow you to enter the foreign income that you were assessed on your most recent assessment from your foreign country of residence. The assessment must cover a 12 month period even if you did not earn income for the whole 12 months. There are limitations with using this method and these include the period of assessment does not overlap the relevant Australian income. You’ve received multiple assessments for the income made by different foreign countries or you have previously used that income assessed to calculate your foreign income.
The last one is the comprehensive tax-based method. This method will require you to declare your gross foreign income and enter allowable deductions similar to how you would complete an Australian income tax return. If the expense was for both work and private purposes, you can only claim a deduction for the work related portion.
We hope that clears up some of the confusion out there. We’ve seen a lot of chatter on social media about who has to and who doesn’t have to report. Pretty much everyone has to report but your level of obligations will be dictated by your overseas income and just when you think it hasn’t changed enough, we had an announcement this week that will probably be ratified through the budget next week and that is the changes to the HECS, HELP and TSL debt threshold. In current legislation the threshold will be reducing to $51,597.00 in the 2018/19 financial year and that payment threshold will be at 2%. However, as announced this week that threshold will be reduced even further.
The lower threshold will decrease from $54,000.00 down to $42,000.00 in the 2018/19 financial year and the first percentage on that threshold will be 1%. We know that’s not very pleasant news for those over there who are non-residents for tax purposes, yet still have HECS, HELP and TSL debt.
If you have any questions about setting up a myGov account, we’ve previously loaded up a ‘how to set up a myGov account as a non-resident’ video on our YouTube channel. See below