Understanding compulsory repayments for study & training support loans

Study and training support loans can be daunting. However, understanding how compulsory repayments work can go a long way in giving you clarity around it all, as well as peace of mind. In this article, we'll explore how and when these repayments are made through the income tax system, providing clarity and guidance for those navigating educational financial commitments.

How repayments works.

Understanding compulsary repayments.

Compulsory repayments for study and training support loans are integrated into the income tax system — that actually makes the process pretty straightforward for you. For example, when you lodge your tax return, you don't need to supply any loan information because it’s already sitting there ready to go.

If your repayment income exceeds the minimum threshold, the ATO calculates your compulsory repayment and includes it in your Notice of Assessment. This calculation is based solely on your income (without consideration for your parents' or spouse's earnings).

Importantly, the rate of repayment scales with income. This means that, the more you earn, the higher your repayments are.

Making voluntary repayments.

When in the financial position to do so, some people like to make voluntary repayments. Although study and training loan repayments don’t have interest, it’s indexed each year and increases with inflation. If voluntary repayments are made before June 30 each year, those payments are not subject to indexation. Additionally, voluntary repayments help pay off the debt faster, and this gives a lot of people peace of mind. 

When you won't have to repay.

In certain situations, you may not have to compulsory repayments. For example, if you have a spouse or dependants and your family income is below a certain threshold, making you eligible for a reduction or exemption from the Medicare levy, compulsory repayments may not apply. In these cases, you can inform your employer via a Medicare Levy Variation Declaration Form to prevent additional withholdings from your pay.

Regarding your employment.

Advising your employer.

Whether starting a new job or already employed, you have to inform your employer if you have a study or training support loan. Your employer should provide you with the appropriate paperwork to disclose this.

Under the Pay As You Go (PAYG) withholding system, employers withhold additional amounts from your income to cover the compulsory repayment. Once your loan is fully repaid, updating your withholding declaration ensures no further deductions are made.

Understanding additional amounts.

The additional tax withheld by your employer is remitted to the ATO and applied to your loan account after you've lodged your tax return, and a compulsory repayment has been calculated. This ensures that repayments are accurately aligned with your income, keeping everything fair and affordable.

For business or investment income earners.

For those earning business or investment income, the PAYG instalments system allows for regular payments towards your expected tax liability, considering any study or training loan debt when calculating your instalment amount and rate. This flexibility accommodates personal circumstances, allowing variations in instalment amounts or rates.

The ATO's commitment.

The ATO provides accurate, consistent, and clear information to help you understand your rights, entitlements, and obligations. Their commitment extends to taking responsibility for any incorrect or misleading information provided, ensuring you can rely on the guidance provided.

We're experts on PAYG and study and training loans.

Understanding compulsory repayments for study and training support loans is crucial for managing your educational debts. Through the income tax system, the process is made as straightforward as possible, but a little help from an expert goes a long way. If you’re looking for support in this area — or anything tax-related for that matter — we’ll help you navigate financial responsibilities confidently. Get in touch to get started.