Australian HECS/HELP debt and tax agreements

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In the last few days I received an email from the ATO saying that "There are changes to your Higher Education Loan Programme repayment obligations" - essentially that earnings overseas are now subject to some sort of taxation that should contribute back to paying off any remaining HECS/HELP educational debt back in Australia. They are requesting that we voluntarily update our details (presumably to make it easier to track down any earnings) and suggest that over the next 12-18 months, they will expect to start collecting repayments on the debt.

 

Thanks to a friend I found the list of Australian tax agreements with other countries which includes Germany (http://www.treasury.gov.au/Policy-Topics/Taxation/Tax-Treaties/HTML/Income-Tax-Treaties ) but it is far from clear what the scope of the agreement could extend to. I know in the last year or so the government has been blustering about all of the overseas "tax avoiders" (I assume mostly they are talking about people in the US and UK) but didn't think their reach extended appreciably to Germany.

 

Does anybody know more about the mechanics and legitimacy of this? I'd like to know more about how it might work, or if it is even a real possibility or perhaps they are just hoping people will voluntarily give their details?

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I know nothing about the tax situation itself, but surely you have a moral duty to pay back your student loan?

 

Maybe some people think it is "clever" not to pay it back, but if everybody were that "clever", surely the loans would  cease to be offered?

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Thanks for your concern - actually I have no problem paying it back.

 

I'm interested in the logistics of how this will actually work and what will be involved. Any information on more concrete terms would be appreciated.

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Morality aside, until the recent change in legislation, it was perfectly legal for non-resident Australians *not* to pay back their student loans. (I've been paying, on and off, but in a choice between incurring more debt while supporting financially-strapped relatives and repaying loans when I didn't have to, the loans weren't going to win).

 

The change in the law are briefly introduced here and here; what details there are can be found in this FAQ. (I also asked a question here about the tax deductability of HECS repayments last month.)

 

The edited highlights:

  • From 1 January 2016, all people with a HELP or TSL debt who exit Australia with the intention to work overseas for more than 6 months in a 12 month period will be required to notify the Australian Tax Office (ATO) using their myGov account. People with a HELP or TSL debt who are already overseas at this time will have until 1 July 2017 to notify the ATO.

  • From 1 July 2017, all people with a Higher Education Loan Programme (HELP) or Trade Support Loan (TSL) debt, including overseas residents, will be obliged to make HELP repayments. These arrangements will apply to all five HELP loan schemes (HECS-HELP, FEE-HELP, VET FEE-HELP, OS-HELP and SA-HELP) as well as all TSL debts. People with a HELP or TSL debt will need to self-assess the income they have received in the 2016-17 financial year and submit the details of their world-wide income to the ATO. Self-assessment will be due by 31 October each year.
  • People with a HELP or TSL debt who are not Australian residents for tax purposes will be required to assess their world-wide income, submit details to the ATO and subsequently make HELP repayments based on their combined Australian and world-wide income. This occurs in much the same way as would happen if they were residing in Australia. Income will be reported and repayments made through ATO online via the myGov website.
  • If you work overseas, you will start repaying your HELP debt under the same conditions that would apply if you were living in Australia. You will start repaying your HELP debt if your repayment income is above the minimum repayment threshold. The minimum repayment threshold is adjusted each year. For the 2015-16 income year, the minimum repayment threshold is $54,126.
  • Whichever country you are residing in, you will have to repay your HELP debt if you earn above the minimum repayment threshold. There are no exceptions.

 

Given that HECS repayments are normally integrated into the Oz tax system, I've no idea what sort of annual repayment will end up being required based on already-taxed German income. (The tax officer calculator throws up some fairly random numbers, some of which would be rather painful if paying in installments isn't possible.) I will personally be extremely annoyed if this ends up making me an Australian tax resident again, but the ATO hasn't given much detail away yet.They're apparently still working out what evidence of income will be required, and they'll be publishing a tax-year exchange rate to use. Basically, it's as clear as mud at the moment.

 

All that said, my parents' accountant back in Australia, when they raised the topic with him, was very dubious as to the likelihood of the ATO actually being able to chase down most Australian overseas residents, particularly in countries without a critical mass of Australians (basically, places that aren't the UK, the US or NZ). Which is all very well until one wants to go back to Australia... (Whether Oz will follow NZ and actually arrest student debt non-repayers is a question for another day!)

 

So in short: not just a possiblity, but an obligation - however, the exact procedure is still unclear. I'm just going to make sure I keep track of all my German payslips from July 1st 2016, register just before 2017 deadline, and hope they've got things sorted by then.

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Flavia, thank you so much for your extremely detailed reply. That was exactly the kind of perspective I was looking for.

 

I'm also quite concerned at the details that are far from clear now - we pay a far higher rate of income tax here in Germany and without taking that into account, the assessed repayments based on gross income could be very painful as you say. Not to mention the out of phase tax cycles (although I guess that's a lesser issue).

 

Guess I'll just wait and see, but thanks again for your input!

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So glad I found this thread...

 

I also received the letter from the ATO (via my parents). I've lived in Germany for about 8 years and never gave much thought to repaying my HECS debt during that time. In principal I have no problem in paying it back, though I'm concerned about how they will go about it. I would appreciate if those of you in the same boat could share their experiences.

 

 

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I'm also super grateful for this thread!

 

I've been living in Germany for almost 4 years and after my double degree + diploma + OS-HELP for my exchange I have quite a large debt. 

 

There is some updated information on the ATO website about overseas repayments (https://www.ato.gov.au/Individuals/Study-and-training-support-loans/Overseas-repayments/) but it's still really unclear to me how we declare it (and what the best "self assessment" method is..) I hope that it's clearer after 1st July.

 

What I'm also wondering about is the SV-Abgaben we have to pay here (KV, RV, AV, PV)... obviously there's the Medicare levy but that's not comparable to the amount we pay for health insurance, super contributions are there too but I've never worked full-time in Australia so I don't really know how much it is or if the payments are comparable, and I don't even know if you pay for unemployment insurance or Pflegeversicherung in Australia!? But they are pretty hefty contributions in any case and means our gross:net is different than it would be were we paying (or not) these costs in Australia. I'd like to assume they've considered this but does anyone have any information about it? I know there are just a couple more weeks to wait to find out the answers (maybe) to these exciting questions but if possible would like to know how it's going to affect our finances already!

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Sorry to revive this very dead thread. I'm currently facing exactly the same question - is there some way of reporting Non-Resident Foreign Income which takes into account the fact that there's a much bigger difference between gross and net pay in Germany than in Australia?? I would be eternally grateful if anyone has found information on how we should report German income!

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Unfortunately there is no consideration of cost of living/wages in calculating repayments. You need to report your gross world-wide earnings. On the bright side, the AUD is quite weak at the moment so in effect this year you get a discount. 

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Hey everyone,

 

This information is helpful but I also read something about calculating the OS income you'd have to pay tax on in Australia (1) and that on top of that, the whole HELP thing... AND the different financial years between Aus and D.

 

Does anyone know a tax consultant in the Cologne area versed in German and Australian tax? Would really like to talk someone about this all.

 

Would really appreciate any help I can get!

 

(1) https://www.ato.gov.au/Individuals/Tax-return/2018/In-detail/Publications/Guide-to-foreign-income-tax-offset-rules-2018/?=redirected#Calculating_your_offset_limit

 

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5ca88b6bed00c_HECS2018redacted.jpg.164015ca88b39274fa_HECS2018redacted.jpg.82e68Yes. 2017 was the first year I paid it, so without even thinking too much about it I claimed the repayment (a couple of thousand euros) as "Kursgebuhren" in that year's tax declaration and it was accepted no problem. I did the same for 2018 and now have a Veranlagung from the Finanzamt. After looking more deeply into it I am no longer sure if the claim is is valid within a strict interpretation of the tax law, although it is obviously ok within the spirit of the tax law, in that any expense incurred in a tax year, which allows the tax payer to earn money and pay taxes, shoul dbe claimable against the tax burden. After looking around it seems that there are two relevant precedents: 1) the US system, where students take out a personal loan to pay tuition fees and perhaps to support them during the years of their studies, and are charged yearly interest on that loan, and have to pay that loan back no matter what (even to the point of bankruptcy), 2) the German system, where students can claim any expense for tuiton fees (fees only, not for support/maintenance) as a carry-over tax loss into supsequent years when they start earning money. It seems that the Australian system bears more similarity to the German one, in that tuition fees are first paid by the Government, and that each subsequent year that the student earns money they get an income-dependent bill stating their contribution for that year. The important factors being that the bill is only created in that tax year, there is no interest applied to the amount that the Government 'paid' on behalf of the student (although it is indexed annually to account for inflation/deflation of the dollar), and that if the student does not earn any money in a particular year, or earns less than a specified amount, then they do not incur a bill in that year. So, in the German system, the student incur a debt or a financial loss in the study years, and then claims that back as a tax loss in subsequent years (up to 7 years later is what I have read elsewhere). In my case, and that of other tertiary educated Australians paying taxes in Germany, I only incur the expense for educational course fees each year that I earn money, and would not incur it if I did not work.


As to practical considerations, I must submit evidence of my educational expenses but the only thing that I get from the Australian Government is the attached. Could someone with German tax expertise provide any insights or feedback on this issue, in particular with reference to relevant section of the tax law, and on whether the attached may be enough for the Finanzamt? I guess that this will be of great benefit to many of the Toytown germany readership who find themselves in a similar situation to mine.

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Update: I provided the above notice, along with a description of the HECS deferred payment scheme, and it was accepted by the Finanzamt.

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On 07/08/2018, 13:33:06, Auswanderer said:

Unfortunately there is no consideration of cost of living/wages in calculating repayments. You need to report your gross world-wide earnings. On the bright side, the AUD is quite weak at the moment so in effect this year you get a discount. 

Actually, HECS repayments are calculated on the concept of "Repayment Income", and when submitting details of your worldwide income the ATO specifically asks for "Taxable Income" which translates literally, conceptually, and legally to "zu versteuerndes Einkommen", as listed on the Einkommensteuerbescheid that you have to provide to them as proof of income.

I'll just leave that there for you guys. Have a nice summer, love from sunny Karlsruhe :)

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