Australians with student debt will save thousands of dollars from today as the government's new HECS and HELP repayment rules kick in.
The promised legislation to slash student debt by 20 per cent was one of the federal government's early post-election priorities and passed the senate in July.
At the time, Education Minister Jason Clare admitted it would be a while before the savings kicked in.
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"The next step is for the tax office to do the work they need to do. Now that the bill has passed, they've got the certainty they need to make the changes to their systems to pass this on to three million Australians," Clare said then.
"That will take a bit of time. They've got to write about 50,000 lines of code to implement this and make sure that they get it right.
"But this is now going to happen. It's guaranteed. And it will be backdated to 1 June this year, before indexation happened."
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From today, graduates earning around $70,000 a year will save about $50 every fortnight, adding up to about $1300 in savings each year.
The minimum income to start repaying loans is also rising from $54,435 to $67,000.
Three million Australians are set to benefit from the bill, with $5520 wiped from the average debt of $27,600.
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How will it all work?
"The ATO will automatically apply the 20 per cent reduction to your outstanding debt and retrospectively adjust any indexation applied to your debt," CPA Australia's business lead Gavan Ord told 9news.com.au.
"No action is required from individuals. The government will notify you when the changes are implemented, and balances can be checked via myGov."
This reduction will be applied on top of any repayments made throughout the year after your tax return is completed.
Ord said Australians should avoid listening to financial advice from online influencers about how to optimise their tax returns.
"We urge Aussies not to follow misleading advice from social media 'finfluencers' suggesting you delay lodging your tax return," he said.
"Lodging your return is a legal responsibility and essential for accurate assessment."
What happens if my HECS debt is finally paid off?
Compulsory HECS repayments aren't allocated to your debt until after you have lodged your tax return.
After this, it might mean your debt has reached the all-important zero balance.
It means you will no longer see the compulsory repayments taken out of your weekly, fortnightly or monthly pay.
You'll need to let your employer know about this though, as it won't automatically stop.
It involves filling out a tax form called a "withholding declaration", which indicates to your employer that you no longer have a HECS debt.
It's as simple as ticking the box "no" on the form when it asks if you have a higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start-up Loan (SSL) or an Australian Apprenticeship Support Loan (AASL) debt.
Once your employer stops withholding extra tax, your next paycheck may slightly increase.
This amount will vary depending on your salary and what your regular contributions were.
You have to be earning above the threshold for it to impact your pay.
Australian taxpayers earning between $54,435 and $62,850 pay one per cent on their income and the figure rises the more you earn.
"Another proposed change to HECS is raising the income threshold at which people are required to start repaying their debt from $54,435 to $67,000, starting 1 July 2025, subject to the law being changed," Ord added.
"This means that if you earn less than $67,000, you won't need to make repayments, although voluntary repayments remain an option.
"This change also means your repayments will be lower."
If you've overpaid your HECS debt throughout the previous financial year, the ATO will take this into account and it will be refunded to you when you lodge your tax return.
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