By keeping on top of your HECS or HELP obligations, you’ll remain responsible in the eyes of both your employees and the law.
If you’ve ever studied or been involved in payroll, you would have heard of HECS and HELP. Put simply, HECS and its more recent scheme, HELP, are both higher education financial assistance schemes provided by the Australian government.
What is HECS-HELP?
HECS (Higher Education Contribution Scheme) and HELP (Higher Education Loan Programme) essentially work like a student loan that a person repays to the government from their tax withholdings. The amount a person is required to pay each year depends on their taxable earnings for that income year. And while HECS-HELP loans do not accumulate interest as such, the amount of the loan is indexed each year in line with the Consumer Price Index (CPI).
Students with a HELP-HECS loan are required to start repaying their debt once their income reaches the minimum threshold for repayment (currently $54,126).
Your Obligations as an Employer
That’s where an employer’s obligations come into play. As an employer, you have a legal responsibility (to both the employee and the Australian Taxation Office (ATO)) to withhold the appropriate amount under Pay As You Go (PAYG) taxation.
Failure to withhold an appropriate deduction can result in a penalty from the ATO – an amount equal to what you should have withheld for your employee in the first place. This mistake can cost your business thousands of dollars.
How Do I Meet My PAYG Obligations?
The first thing to do when hiring a new employee (as opposed to a contractor) is to ascertain the employee’s tax file number by getting them to complete a Tax File Number Declaration Form.
The form will require the employee to declare whether they have HECS-HELP and will help you determine the amount that will need to be withheld from payments made by you.
The next step is to register for PAYG. You can do this through the Online Business Portal, by phone, via mail or through your tax agent.
Lastly, you can maintain the correct withholdings by using a third party accountant, a tax agent or an effective accounting payroll system. For example, QuickBooks Online is a streamlined accounting software that can manage payroll information, deductions and PAYG slips. Best of all, it can be used anywhere and anytime.
Managing HECS-HELP withholdings for your employees can be a simple process if you follow the tax rules and make your job easier with online accounting software.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.