HELP Debt

Discussion in 'Loans & Mortgage Brokers' started by Carol M, 10th Oct, 2019.

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  1. Carol M

    Carol M Well-Known Member

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    Hi
    Just wondering if someone's income is below HELP threshold, do banks still factor it in to serviceability calculations as a debt, like they do with credit card facility. i.e. will it effect serviceability. This persons income is only 38,000 so well below the 45,000 threshold.
    Thanks
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Hi Carol, no they don't - if there's no repayments, the debt is not considered for servicing purposes.
     
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  3. Carol M

    Carol M Well-Known Member

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    Great, thanks
     
  4. Redom

    Redom Mortgage Broker Business Member

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    Interesting question - dont think they will. if it comes off your payslip and flows through to your net income (I assume it doesn't), then they may need to expense it.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I would think not either because it is only repayable if above the threshold.
     
  6. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    One of the privacy issues with HELP debts is they arent visible to lenders. Someone has to volunteer the information or it needs to appear on a ATO assessment notice etc.

    The HELP repayment threshold reduction in recent times has made more people liable to repayments enhancing visibility to lenders when they ask for notices as assessment and copies of returns lodged. They also seem to be asking for the past year returns earlier eg some clients are lodging 2019 returns because a lender is requesting a 2019 notice and wont use a 2018 year one.
     
  7. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    The amount of HECs you repay (via your employer) depends on your taxable income. Lenders simply use your income to determine the repayment amount and include this as a liability in the same manner they would a personal loan.

    In other words, if your income is below the threshold, lenders view HECS as a $0 expense.

    However, some lenders have creative ways of determining what your income is for this calculation. At least one lender includes existing and proposed rental income in their 'total income' figure, rather than the taxable income. This means that the outgoing they calculate may be significantly higher than it actually is which can affect your serviceability calculations.
     
  8. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Repayment Income (much like Adjusted taxable income) is used for HELP repayments so those other lenders are probably aligning their servicing calcs with actual tax rules. eg Taxable Income $80K, Rental loss is $10K so repayment Income is $90K

    FBT values also count.
     
  9. TSK

    TSK Well-Known Member

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    yes it most certainly does. I still don't understand why when you make a loss the amount you need to pay increases.
     
  10. Scott No Mates

    Scott No Mates Well-Known Member

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    The loss is disregarded and added back as if you didn't have the loss ie the pre-loss income is considered.
     

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