Beware – new rules for Australians living overseas with student debt

Posted on October 7, 2017 by - Individual tax returns, Non-resident taxation, Students

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From 1 July this year:

  • Australian non-resident taxpayers with a HELP or TSL debt will need to calculate their taxable income for 2016/17; and
  • All taxpayers with a HELP or TSL debt who intend travelling overseas for 183 or more days in any 12 month period must submit an overseas travel notification through their mygov account.

These new rules were introduced by the government in an attempt to reduce outstanding student debt. Over the 10 year period to 2012-13 the total HELP debt grew from $9.2 billion to $30.3 billion. In the latest Budget, Treasury estimated the average HELP debt was $19,100 and the average time to repay a student debt was 8.8 years.

If you are living overseas and have student debt it is strongly advised that you should work out whether to just pay back your debt rather than be subjected to the new rules.

The government has created a new tax concept, called ‘worldwide taxable income’ to recover outstanding student debt.
This is essentially the sum of all assessable income minus allowable deductions from every tax jurisdiction in the world, for the Australian financial year. Foreign currencies will be converted to Australian dollars.

If you are living overseas and have student debt it is strongly advised that you should work out whether to just pay back your debt rather than be subjected to the new rules.

Three scenarios could apply to you, if you are not a pensioner:

  • If your worldwide taxable income is $13,717 or less (25% of the HELP repayment threshold -$54,869 for 2016/17), you do not need to repay any of your student debt, however you must complete a non-lodgement advice.
  • If your worldwide taxable income is between $13,718 and $20,542, you may need to lodge a tax return, depending on your circumstances.
  • If your worldwide taxable income exceeds $20,542 or more you must lodge an Australian tax return

If the last scenario applies to you, I advise you to contact a tax agent.

The tax return lodgement deadline for Australians living overseas with a student debt is 31 October.

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