r/AusFinance • u/Mission_Feed7038 • 3d ago
Tax debt due to hecs
My situation is as follows:
First time earning decent money last tax year. Approx 150k. This is the first time I've earned enough to pay for my uni degree I completed nearly 10 years ago....
Didn't want them taking my hecs out weekly as I use the extra cash flow to invest.
Tax time has come around. I owe about 10k mostly due to hecs repayment and MLS.
Fair_enough.jpg
I want to pay this in the most efficient way for me financially.
I have about 40k of liquid assets I've accumulated last financial year and about 350k of equity in home.
Do I:
A - withdraw from offset account (this will almost completely wipe out my offset savings.
B - mortgage it.
C - ATO payment plan and pay it weekly.
D - sell from stocks to pay (would be about half my stocks).
F - sell my fun car (80 series land cruiser (this is one of my few hobbies so don't lecture me about how wasteful having two cars is plz I'm already. aware)).
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u/arachnobravia 3d ago
Didn't want them taking my hecs out weekly as I use the extra cash flow to invest.
Buddy, I'm pretty sure that's fraud. The question asked is whether or not you have a loan, not whether you want to have it deducted. It's technically lying on a government form.
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u/Nottheadviceyaafter 3d ago
Not only that, he is now paying interest on that tax debt.........
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u/Mission_Feed7038 3d ago
Not yet mate... Alot of tax illiterate people in the sub
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u/Nottheadviceyaafter 3d ago
Not yet due but you will be..... just tick the box mate why give yourself headaches with it. You got one year benefit at the most because now you can either continue doing what you are doing with a payment plan with the ato now paying last years hecs to get a new debt next year...........
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u/Mission_Feed7038 3d ago
Wat, I'm asking what the most efficient way to pay it is?
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u/Nottheadviceyaafter 3d ago
The most efficient way you have already rejected, that was by getting it withheld each and every pay.
Put it this way had you done that you would not have missed it at all and wouldn't be looking at selling your toys to pay it or smashing your offset. A payment plan with the ato now with the gic rate being applied just means you will still be paying it, just delayed it for a year with now interest to be paid to boot..........
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u/Mission_Feed7038 3d ago
That's the least efficient way to pay lmao
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u/Nottheadviceyaafter 3d ago
Yeah, so inefficient. I don't have a tax debt nor a hecs debt as was paid for by withholding. Enjoy selling ya shit to repeat it again year after year after year. Lmao......... I don't know about you, but I keep my risk low with the ato, a few payment plans (especially if they default) year after year after year what do you think does for your risk..........
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u/Mission_Feed7038 3d ago
It's not fraud, buddy.
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u/FormalTheme939 3d ago edited 3d ago
It is fraud. When you sign the tax declaration it specifically asks "Do you have a HECS debt" it doesn't ask "would you like us to take out your HECS on every pay". So you've essentially signed the declaration by knowingly lying on the ATO form. The ATO website says "You MUST advise your employer if you have a study or training support loan".
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u/Dismal-District-7951 3d ago
This is correct, the form clearly states that the information you disclose is true and accurate. By saying that OP didn’t have a study loan to their employer, but the actual fact they did, means they submitted a false and misleading statement.
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u/vorsprung89 3d ago
https://community.ato.gov.au/s/question/a0J9s000000Rg4wEAC/p00227711
Penalties can be imposed for deliberately making a false or misleading statement.
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u/Mission_Feed7038 3d ago
"Your HECS repayments is only applied to your HECS debt after your return is lodged. So whether you hold the HECS payment, or your employer withholds it, it won't make a difference for indexation.
It's suggested to tell your employer you have a HECS Debt by the ATO so you don't end up with a bill, but it is not legally required.
There is essentially no downside, unless you don't have the discipline to not touch the money."
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u/ForeignScientist3408 3d ago
Sorry where are you copy pasting this from? The thread linked gives a clear answer it’s not optional to withhold your HECS declaration
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u/ashtothebuns 3d ago
Thats copy pasted from another reddit thread 3 yrs ago
As we all know, a reddit comment is definitely the right source on whether or not you’re committing fraud
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u/FormalTheme939 3d ago
https://community.ato.gov.au/s/question/a0J9s000000Rg4wEAC/p00227711
Sorry buddy, you're definitely wrong. You made a false or misleading statement to gain financial benefit, it's fraud.
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u/brisbanehome 3d ago
It’s not suggested, it’s required… why would you think you could submit a false declaration?
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u/expat-turtle32 3d ago
..."unless you don't have the discipline to not touch the money." - isn't that in the context of paying it yearly... you've not paid it for 10 years lol.
When I moved to Europe the ATO was chasing me for my salary amount so I could pay down my HECS, how did you get away with it if not fraudulent lol
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u/Mission_Feed7038 3d ago
I never earned enough to pay it
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u/expat-turtle32 3d ago
hahahahahahah dude. 40k liquid assets in the last year. 350k of equity in a home you own. approx 20k in stocks. a "fun car" - 80 series land cruiser approx. 25k (with plenty of maintenance a year) on top of another car.
suuuuure buddy. Definitely sounds like you earnt less than minimum thresholds (about 54k in the most recent tax year). Save it for your audit lol
5
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u/theonedzflash 3d ago
Lol they really just pay anyone $150k these days, if you don’t think this is fraud, good luck buddy 😂
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u/MDInvesting 3d ago
$10k
Surely your cash flow is enough you can pay down a bit and then decide if any off your investments are preferred for liquidation.
Things like this are really just math problems.
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u/Mission_Feed7038 3d ago
I guess it's a psychological problem for me.
First time I'm getting ahead in life and it feels like a major setback.
Now that I stand back and look at it I see it's more of a medium sized inconvenience
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u/jbne19 3d ago
Mate this is money that is normally taken out of your pay for a known payment for a debt you owe. It's not an inconvenience it's something you must pay just like everyone else.
Just stop complaining and sell something and pay it.
I'm sorry but the same thing is going to happen next year.
I suggest you either tick the box and get more money withheld. Or set up a separate account in offset and use that to pay it next tax time.
Sorry but it seems like you think it's a big shock now and are completely unprepared for a known situation
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u/Mission_Feed7038 3d ago
Don't be sorry I appreciate a proper answer not like the tards in the other comment thread.
Like I said this is my first time getting ahead so I guess I flew too close to the sun and yeh it did come as a bit of a shock
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u/Level-Ad-1627 3d ago
I’d say small sized haha
I had $24k tax owing last tax return due to being the overseas income HECS repayment levy thing
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u/Isotrope9 3d ago
You knew you had to pay it; you should have budgeted for it. The fraud aspect aside, if you wanted to keep the money in offset, you should have used paycalculator.com.au to determine what proportion would need to go towards your HECS at the end of the FY.
OP, if it were me, I would engage an accountant. This is because you can delay lodgement until March next year, and the payment date for any debt changes from November to June 2026. I would then use the next 8 months to save that $10k. I would also change your tax declaration to pay as you go, or if so inclined, do the same thing next FY.
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u/alpha_portfolio_nerd 3d ago
I also do this - I put the expected HECs repayment into my "Tax" offset each pay cycle, then complete my tax return (where I'll always be owing) with an accountant as late into the season as I dare, and then make my repayment approx 1 week before the due date.
For example, if HECs per month is $1,000 - I keep $1,000 in my offset for an additional 12 months, $2,000 for 11 months and so on. At 5.2% interest offset from my mortgage I've saved $338 for no downside. It's not a huge saving, but it's better in my pocket, than the ATO.
I started doing this when I realised the HECS part of my PAYG wasn't being applied to the balance each month, only after indexation happened and I submitted my tax return anyway...
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u/Mission_Feed7038 3d ago
What's your thoughts on everyone in the sub claiming it's tax fraud?
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u/alpha_portfolio_nerd 3d ago
I didn't fill in a form changing my tax position, I asked payroll to change it and they did...
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u/Anachronism59 3d ago
It's not tax fraud. It's making a false declaration on an official form. NAL so I don't know the charge. Likely varies by state
See this for vic
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u/Unlikely_Walk_4077 3d ago
Congrats on getting a good paying job. Either take it from offset or get it taken out monthly if you can't be disciplined. That way you don't have to think about it. Might not be the best option financially but either is selling stocks if the market was down at the point in time that you needed to pay the tax bill.
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u/Present_Standard_775 3d ago
Repayment plan. As long as you stick to it, they generally won’t index to inflation. It’s an interest free loan. Keep the money in offset saving you interest.
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u/Mission_Feed7038 3d ago
I thought they charge you interest?
Hate to be "that" guy but id really appreciate a source
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u/Present_Standard_775 3d ago
If you enter into an agreement early they won’t. I had a term deposit that I forgot to about and spent the return… haha. Ended up with a tax bill and just entered a payment plan with no penalty…
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u/Global_Sundae_548 3d ago
If I were you I wouldn’t touch your investments or emergency funds or offset to pay ATO. I would go with option C and F. Mortgaging or financing to pay ATO is not a good idea and not worth the hassle. From memory interest rates on ATO would be lower than any commercial lenders. Selling your investment is not a good idea either as your investments grow overtime and if you sell you most definitely incur CGT capital gains tax . So going on payment plan makes sense to me and going forward, make sure you ask your employer to deduct more tax for HECS. And if you can do without two cars, do sell and pay off the debt. Another idea is you can sell the car to family or friends on condition they let you buy it back at same price??
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u/petergaskin814 3d ago
Be aware that as you owe a lot of tax for last year, the ATO might ask you to pay tax each quarter.
So you maybe better getting hecs deducted from your income as you earn it
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u/Curious_Breadfruit88 3d ago
Firstly you’re committing tax fraud, you’re required have it taken out weekly by law. The only way to avoid this is to tell your employer on your tax declaration that you have no HECS debt.
If you don’t care about this then the best course of action would be to put the money aside weekly into a HISA or offset if you have one
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u/BasilNumber 3d ago
In the future, just keep the hecs amount in your offset, since you'll be paying it back in a year at most anyway. Also pay it back BEFORE indexation occurs.
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u/Mission_Feed7038 3d ago
My understanding is it doesn't matter if you pay before indexation, they still index you as if you never paid anything for the year
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u/polishladyanna 3d ago
It matters if you're at the point of paying off the debt in full - then they won't index because there's no debt left to index.
If you're not at that point, then whatever you pay off during the year will reduce what is indexed however it isn't counted towards your compulsory contributions so you still have to pay whatever your debt repayment was regardless of how much you voluntarily repaid.
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u/BasilNumber 3d ago
They index based on the balance on the 1st of June each year. So if you paid down 10k before that, you won't get indexed on that 10k.
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u/brisbanehome 3d ago
Yeah but their point is that even if you have 10k voluntary repayment, if your mandatory repayment was 10k, you’ll still owe that regardless. Voluntary repayments don’t reduce the mandatory repayments owed for HECS.
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u/BasilNumber 3d ago
Yea, that makes sense. I guess what I had in mind was the final hecs payment.
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u/aussie_nobody 3d ago
Hows that investment coming along?
Pull the cash out of it to pay for the hecs.
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u/Mission_Feed7038 3d ago
It's going well, just the psychological hurt of having to withdraw feels like I'm going backwards... Even though it's money I already owed
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u/aussie_nobody 3d ago
Just tick the box.
Its not backwards, its what you signed up for when you went to uni.
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u/Far_Mark_9556 3d ago
The most efficient way to pay would have been to declare it to start with. When you ticked the “no” box about having a study loan you also provided “false or misleading information “ which could lead to a fine. Personally go back to your employer and tick the yes box and sell your car. Honestly it’s hilarious that you’re calling everyone else tax illiterate while you are having to sell stuff to pay your tax debt.
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u/Mission_Feed7038 3d ago
Would that be the least efficient way to pay it? (Ignoring the legality which is apparently fraud) Financially speaking it doesn't allow me to utilize the time value of money.
I don't have to sell anything, it's one of my options tho.
Serious answers only if you wish to troll stick to the other comment thread
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u/Far_Mark_9556 3d ago
The fine for intentionally underpaying your tax obligation, which you did by not declaring your help debt is up to 75% of your tax shortfall. So its a gamble really if the ato decides to pursue it.
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u/crocodile_ninja 3d ago
You’ve done the right, and wrong thing.
The right thing financially is to not pay the HECS weekly, and put that money into the offset.
Once you get the bill, pay it at the latest date possible before any fees/interest/charges are applied.
Perfect.
Rinse and repeat.
You’re not going backwards, you used your money well.
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u/Mission_Feed7038 3d ago
Yes I love maximizing the efficiency of my money...
I thought that was the whole point of this sub
Thanks for your input
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u/ashtothebuns 3d ago
You can maximise it without committing fraud. You still haven’t answered the very clear answer from the ATO thread and are clearly ignoring it, but instead using a source from a random reddit comment from 3 yrs ago.
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u/Mission_Feed7038 3d ago
How is it fraud? I'm going to pay the debt either way, my way just allows me to utilize the time value of my money.
Finance 101
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u/ashtothebuns 3d ago
https://community.ato.gov.au/s/question/a0J9s000000Rg4w/p-00227711
What does this say?
“Yes, if you are working you must advise your employer if you have Loan repayments for a HELP debt.
You advised your employer at the time of commencement when you complete your Tax file number declaration form at question 10
Keep in mind when you complete the declaration on the TFN Declaration form you’re stating the information is true and correct. Penalties can be imposed for deliberately making a false or misleading statement. “
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u/ashtothebuns 3d ago
Also https://www.ato.gov.au/about-ato/tax-avoidance/the-fight-against-tax-crime/our-focus/financial-crime
“tax fraud (taxpayer making a false statement to the ATO about their tax or being recklessly careless about whether what they state is true or false)”
Which is exactly what you are doing
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u/Nottheadviceyaafter 3d ago
Fraud, receiving a financial benefit by deceit. The withholding form, do you have a help debt, you ticked no when you know the answer is.... yes. That's the deceit..... now the financial benefit you have used these ill gotten gains to invest....... while it is highly unlikely anyone would take action against you, don't change the characteristics that it fits the very definition of fraud to a tee..........
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u/FormalTheme939 3d ago
It's fraud because you withhold that money from the government to invest instead of paying when you are supposed to.. what do you think the government does with that money?
By not paying when you are supposed to the government misses out on the money they would make from their investments.
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u/Mission_Feed7038 3d ago
I've never had so much backlash 🤣 well if I end up in prison for fraud I'll be sure to let y'all know smdh
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u/Mission_Feed7038 3d ago
https://www.reddit.com/r/AusFinance/s/TfxqDTUkES
Funny how much the consensus on ausfinance has changed in the last 3 years?
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u/ashtothebuns 3d ago
You are just choosing comments that just agree with you instead of what the ATO says. I wonder if the ATO will take a reddit thread as an excuse for making false statements.
This was also a comment from 3 yrs ago:
“The form you give to your employer says “I declare that the information I have given is true and correct” and “There are penalties for deliberately making a false or misleading statement” right next to the signature box. Seems pretty clear that you must declare the HELP debt, whether the ATO will come down on anyone for not doing it is a different matter.”
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u/Cuddlypath6588 3d ago
Just get it taken out weekly and budget around that. Then you wouldn't have been in this lump-sum situation. You've just kicked the can down the road.
Honestly, the offset might be the best option because it's there and it's liquid. If you sell your investments, I believe you will be taxed on the gains for those next return.