Do you have a HELP Debt?

February 5, 2024 | Robyn Bull

If you have a HELP Debt as well as some spare savings lying around that you don’t know what to do with, it may be worth paying off part or all your HELP debt off early so that you avoid indexation charges.

HELP debt incurs indexation (similar to interest), meaning that the amount owed increases over time in line with inflation.  Indexation is calculated on the 1st of June every year on the total balance of the debt.  Whilst the HELP indexation rate for the 2023/24 year is yet to be released, the indexation rate for the 2022/23 year was 7.1% and it is expected to be just as high this year.  This means that if your HELP debt is currently sitting at $50,000, it is likely to go up by 7.1% ($3,550) on June 1st.

Therefore, it may be worth paying some/all the debt off (if practically reasonable) so that you do not incur such high indexation charges.

When you sign up to these loans, they are touted as “interest-free” loans. This is ok when CPI sits at a low rate. However, with Inflation Rates currently higher than most current home loan interest rates, paying it off early is suddenly a viable and logical option. This won’t be for everyone, but if this case applies to you, it is something to keep in mind.

An example of the CPI on the following HELP debt balances at the 2023 CPI rate of 7.1% are below, as well as how typical HELP repayments are calculated.

If you have any questions about your HELP debt, or repaying it earlier, please give the office a call or touch base with your usual accountant.

 

 Taxable income (RI) Repayment rate   If your current HELP debt balance is Indexation charges at 7.1%
  Below $51,550 Nil $10,000 $710
$51,550 – $59,518 1.0% $20,000 $1,420
$59,519 – $63,089 2.0% $30,000 $2,130
$63,090 – $66,875 2.5% $40,000 $2,840
$66,876 – $70,888 3.0% $50,000 $3,550
$70,889 – $75,140 3.5% $60,000 $4,260
$75,141 – $79,649 4.0% $70,000 $4,970
$79,650 – $84,429 4.5% $80,000 $5,680
$84,430 – $89,494 5.0% $90,000 $6,390
$89,495 – $94,865 5.5% $100,000 $7,100
$94,866 – $100,557 6.0%
$100,558 – $106,590 6.5%
$106,591 – $112,985 7.0%
$112,986 – $119,764 7.5%
$119,765 – $126,950 8.0%
$126,951 – $134,568 8.5%
$134,569 – $142,642 9.0%
$142,643 – $151,200 9.5%
$151,201 and above 10%