Salary packaging with a HELP/HECS debt
You can benefit from salary packaging even if you have a HELP (Higher Education Loan Program) or HECS (Higher Education Contribution Scheme) debt.
Understanding your 'adjusted taxable income'
Although salary packaging can reduce your taxable income (for the purpose of paying income tax), it can increase the gross value of your salary.
This is referred to as your 'adjusted taxable income'.
So your adjusted taxable income equals your salary plus the gross value of your fringe benefits (e.g. $40,900 + $17,667 = $58,567)
How your adjusted taxable income impacts HELP and HECS repayments
The ATO assesses you on your 'adjusted taxable income' when working out how much you should pay in HELP or HECS repayments.
So with an increased gross salary, you may need to increase your regular HELP or HECS repayments.
Otherwise you may end up with a bill at tax time.
A salary packaging and HELP/HECS debt example
|Without salary packaging
||With salary packaging
|Ryan earns $55,000 each year
||Lisa earns $55,000 each year
|He is taxed $10,347*
||She salary packages $9,010 in rent payments, including $220 in administration fees
|Ryan's HELP payment is $2,000
||Lisa is taxed $7,024*
|He then pays $9,010 in rent
||Her HELP payment is $2,855
|His take home pay is$33,443
||Her take home pay is $35,891
|Lisa is $2,448 better off than Ryan because she has paid an extra $655 towards her HELP debt (or an extra $25 each fortnight).
* Includes PAYG, Medicare and Flood Disaster Levy (where applicable)
Before you start…
Before you start salary packaging, please tell your payroll department to take additional HELP or HECS repayments from your salary.
Please also seek financial advice if you're unsure.
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