Personal Taxation: HECS/HELP Debts, Private Health Insurance, Super Schemes and the Medicare Levy Surcharge.
As you enter the workforce many young people (and older people!) begin to enjoy the benefits of a higher income and employment perks. However, there are some significant things to be aware of that can impact your tax bill.
HECS/HELP Debts
If you have a HECS/HELP debt you will want to consider the following as this will impact your tax return outcomes…
- Paying back the loan.
You are required to pay back this government loan once your income reaches the Repayment Income (RI) threshold. The government provides a scale of repayment percentages based on RI. - The calculation of the repayments.
The calculation of your repayment income will include any Salary Packaging (the tax you have saved in salary packaging is grossed up for fringe benefits and included), it will also include any rental property losses, and super-salary sacrificing.
What can you do?
- You will want to tell your employer if you have a HECS/HELP debt
- It would be wise to request your employer to withhold additional tax to offset your future tax bill.
- Not salary packaging items at this stage of your debt obligations.
Medicare Levy Surcharge
If you have a high income and/or salary packaging, each of these will be grossed up into the figure considered by the tax office when calculating your Medicare Levy Surcharge. This could push you into a higher threshold for the levy, and therefore a larger tax bill.
What can you do?
- By taking on private health insurance you can offset the liability of the Medicare Levy Surcharge.
- Not salary packaging items at this stage of your debt obligations.
Private Health Insurance Rebate
Be aware that the Private Health Insurance Rebate is means tested and is determined based on your family income. If your family income pushes over the threshold for the full 30% rebate the tax office will reduce your benefit amount and any over payments are repaid through the tax return process.
FHSS – First Home Super Scheme
This scheme allows you to use eligible voluntary super contributions to help buy your first home. However, your voluntary contributions (e.g. salary sacrificed amounts) will be included in calculating your HELP Debt repayment income for that year. This may result in additional tax payable.
Later, when you draw out the money to buy that house this is also counted as taxable income and counted towards your HELP Debt repayment income.
Before taking on salary packaging or dismissing private health insurance, make sure you consider all of your tax obligations. Vine Accounting will be able to help you navigate the best personal taxation strategy for you.
Read more about these on the ATO website.
- Higher Education Loan Program
- Medicare Levy Surcharge
- Private Health Insurance Rebate
- FHSS – First Home Super Scheme