“That ICPA (Aust) requests the Minister for Education and the Federal Treasurer to change the timing of HECS-HELP debt indexation applied to compulsory repayments.”
The indexation of Higher Education Loans Program (HELP, or also known as HECS) debts has long been an issue for university graduates. Although HECS has been promoted in the past as ‘interest free’, the loan has always had indexation applied at the rate of the current CPI at the time of indexation, June 1. Recently, the Federal Government announced that they would implement a recommendation from the Australian Universities Accord where indexation would be set at either the current Consumer Price Index (CPI) or the Wage Price Index (WPI), whichever is lower, backdated to 1 June 2023. This will cancel the 7.1% CPI indexation applied to HECS-HELP debts in 2023, as well as the predicted 2024 increase of 4.7%, dropping the rate applied to both years to 3.2%. This is a very welcome change for university graduates and apprentices who have debt.
Another recommendation from the Australian Universities Accord is to change the timing of indexation. Currently, once a graduate earns above the compulsory repayment threshold of $51,550, repayments are deducted from wages through the tax system and held by the government until the graduate lodges their tax return when it then applied to reduce the debt. The total amount deducted from wages over the financial year is not applied to the loan until after the graduate lodges their tax return. The unjust issue is that indexation is applied to the debt on 1 June, which is before the repayments have been applied to the loan, disregarding the fact that the graduate has had repayments deduct from their wages over the previous 11 months.
We understand that this is a complex system for the tax office to administer, and that any changes would not be easy to make, but we feel that the timing of the indexation of the debt is unfair. Applying indexation after the repayments have been deducted from the debt would be far more equitable.
This could be remedied by indexation being applied 1 November each year after the Individual Tax Return due date of 31 October. If this indexation date was adopted, any repayments deducted from wages during the previous tax year would be included in the balance of the HECS-HELP debt before indexation is calculated and applied.
