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Staff member wants to deduct extra pay towards HELP debt

Jen Dixon

I'm a bit out of my depth with this one- any help you can give would be greatly appreciated.

I have a staff member that I have set up to repay her HELP debt since May this year, including an extra deduction of $100 each fortnight (extra tax) towards her HELP debt. She says that when she goes into MyGov she can not see any contribution against her HELP debt (her debt has not decreased).

Any ideas what I might be doing wrong? Would the extra tax be automatically applied against the HELP debt or not?

Many thanks in advance for you help. Ive attached a snip of the pay set up below.

Comments

Larissa Hicks

Hi Jen,
The extra tax will not automatically be applied and reduce her HELP debt each pay period.
It will build up during the financial year and when she lodges her tax return, there will be a larger refund available to her as she has paid more tax during the year. She would then receive her refund from the ATO (which would be larger than had she not paid the extra tax and bear in mind she may not notice greatly as for May and June would only be about $400) which she would have to pay to the ATO as a voluntary HELP repayment.
Hope this helps
Larissa

Jen Dixon

Hi Larissa, thank you for your response, that clarifies a lot of things. So if she wanted to reduce her HELP debt throughout the year she may be better off making voluntary contributions outside of payroll rather then using the payroll like a savings system for her.

Just for me to be clear on this- all of the tax withheld per payroll is lumped together and at the end of the FY the ATO assessed how much HELP debt should be repaid depending on her wages and threshold. Any extra she gets in her tax refund (from deducting the extra $100 per fortnight in payroll) is her opportunity to use the money to make a voluntary payment towards her HELP debt. There is no facility through payroll for the $100 she has deducted each fortnight to go directly to her HELP debt each month throughout the year- this needs to be done via a voluntary contribution.- Have I got that all correct?

Linda ABC

Further to Larissa's comments - I would add that depending on how much she earns there may be no real contribution via the Tick for HELP Debt that would be applied to the debt either? I believe you have to earn more than $45881 (last financial year) or $46620 (this financial year). Here is a link to the How to make a voluntary repayment of HELP debt https://www.ato.gov.au/individuals/study-and-training-support-loans/voluntary-repayments/

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Jen Dixon

Thanks Kevin, I think she was exploring her options about how to repay and thought that a regular automatic deduction would be a sensible way to pay off her debt. Now I understand that she would actually be better off making a voluntary contribution herself each fortnight as it would be directly applied to her debt throughout the year.

Jen Dixon

Thanks so much Linda. My staff member earned close to $57k so she would qualify to pay some HELP debt.

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Craig Rowley

Hi Everyone,

I also have an employee with a Trade Support Loan debt.

It is my understanding that once the employee reaches a certain earning threshold that they are required to have weekly payment withheld through the taxation system.

I have gone into the "Taxes for Employee Name" window and checked the "HELP Debt" check box under STSL. Then when I process the next pay run it has no effect to the amount of tax withheld. My employee is over the threshold, around $58K.

I'm not interested in being told to tell him to make voluntary payments, as that isn't how it is supposed to work.

Reckon is up to date and the tax tables are current.

Does anyone have a solution to make this function work correctly.

Thanks
Craig

Craig Rowley

Also by doing it through payroll, the debt comes out pre tax, saving the employee money.

Bruce

I haven't had any issues with the Trade Support Loan debt.
A common tax scale is used irrespective of whether it is a HELP, TSL debt etc (See https://www.ato.gov.au/Rates/HELP,-TSL-and-SFSS-repayment-thresholds-and-rates/)

I have checked my recent tax calculations, in Accounts Hosted, for people with one of these debts and the results are the same result as the ATO's tax withheld calculators

Acctd4

Hi Craig

Did you make sure you clicked on “OK” in the Taxes window & then “OK” again when closing out of the Edit Employee window in order to save your change?

I’ve not known it to not calculate if the checkbox(es) are ticked. Have just tried it out in the Sample file & the PAYGW amount did correctly increase accordingly as it should.

What Tax Code (Scale) (eg 2-TFT) have you got selected?

Check that you have also correctly configured the applicable employee’s Payroll Item(s) for PAYGW.

Lastly, check the Pay Dates – It will only affect Pays created/dated AFTER the date you have ticked this checkbox.

Just to clarify, the amount does NOT “come out” pre-tax! (That would mean their PAYGW amount WOULDN’T increase & it would then be classed as Salary Sacrifice!?)

It doesn’t save the employee money but it does prevent them getting a nasty bill when they do their tax return if sufficient tax hasn’t been withheld. Instead, it is an increase in their tax withheld amount throughout the year in order to cover anticipated compulsory repayments when their FY taxable income position is determined.

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com

Linda ABC

Hmm... I would be careful with salary sacrificing the voluntary repayments (to save the employee tax) as these have FBT implications and are probably not worth it to the employee/employer unless earning a great deal of income?

However, as Bruce said the compulsory payments through the Tax Scales & ticking the HELP debt box should be working? In order to check if the system is calculating the tax - go to the Tax Withheld field when doing the pay run - and delete whats in there and it should repopulate with the system generated amount? maybe if you have been manually putting in an amount, then that is sticking in there? and as Bruce said, check against the ATO printed tax tables to be sure?

Craig Rowley

I'm going to look silly now, but after I posted I went back, unchecked and re checked the Help Debt tick box, as I have previously done, and performed a dummy pay run to check as I had done previously and now it seems to be withholding additional PAYG.

I have noticed though that it doesn't list it specifically as a HELP Debt payment, my concern now is, does STP report this as a HELP Debt payment, or just as extra tax withheld, as he will accrue interest throughout the year if not reported correctly.

Bruce

There is no requirement for the STP to isolate the amount of additional tax paid by somebody with a HELP debt - it just gets included with the PAYG Withholding deducted from the employees pay. (If you think back to the old PAYG withholding statements and group certificates the same thing applied - employers just reported the total tax withheld).

Everything else from there is between the ATO and the employee

Acctd4

Agree with Bruce ……. It’s important to clarify that it is NOT a HELP Debt Repayment. It is simply additional tax towards an anticipated compulsory repayment liability for it, come EOFY.

As an example …

* Employee A has a HELP/TSL Debt & earns over the repayment threshold.

* They have been having the required additional tax withheld throughout the year by their employer.

* When Employee A does their tax return, due to other factors including significant deductions, their taxable income is now reduced down to an amount below the repayment threshold.

* The Result = Employee A gets a refund of all their additional tax withheld as the repayment is not required.

Basically, all the FY’s PAYGW tax you’ve had withheld sits in a “bucket” if you like until you do your tax return for that FY, the purpose of which is to reconcile your income v your tax liability. It is only upon determining what your taxable income is (gross income less allowable deductions) less any relevant offsets that one can identify whether tax withheld has been over-sufficient/sufficient/insufficient. You then get the applicable result in either a refund/net result/tax payable respectively.

Shaz Hughes Dip(Fin) ACQ NSW, MICB

Reckon Accredited Professional Partner Bookkeeper / Registered BAS Agent (No: 92314 015)

Accounted 4 Bookkeeping Services

Ballajura, WA

0422 886 003

shazinoz2@bigpond.com

www.accounted4bs.com

Craig Rowley

Great, thanks for the help everyone, I should have asked here weeks ago.

The only reason I was concerned about the way it is reported is because he gets charged interest throughout the year if the compulsory payments are made, so i assumed that it would be reported appropriately so that it didn't accrue interest.

As it all seems to be working correctly now, its really out of my hands.

Thank you all again.

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