It was a matter of ticking the box. Izzie didn’t and now she has a $5000 tax headache. Chartered accountant GAIL FREEMAN shares the tale of woe. 

Izzie came to see me upset at not getting a tax refund this year. Worse still, she had just received her tax assessment and she has a debt of $5000.

“I don’t know how I can afford to pay it,” she said in despair. 

Looking at her assessment, it appeared that the problem was her HECS-HELP debt. 

“The process for repaying a HECS+HELP debt is through your weekly tax installments,” I said.

“When you started your new job, you should have completed a new TFN declaration and answered question 9(a): ‘Do you have a HELP debt?’ by ticking the ‘yes’ box. Likewise for a Financial Supplement debt, you need also to tick the ‘yes’ box. 

“By not completing a new form, then tax continues to be deducted at the rate without a HELP debt and you’ll end up in the same situation that you are now – with a large tax debt at the end of the financial year.

“I also recommend that you check your salary for the next couple of pay periods to make sure the extra tax is being taken out. I have known pay offices to not process the TFN declaration correctly, so it’s up to you to make sure that your tax deduction is now correct. 

“In the 2024 tax year you start to pay back your HELP debt when your salary exceeds $51,550. Repayments are on a sliding scale based on your taxable income after adding back any investment loss. This is why the repayment can only be accurately determined after you have lodged your tax return.”

Izzie said she had told the pay office of the HELP debt, but that was all. 

“I didn’t fill in any form as I thought it was all taken care of. It will be hard to repay that amount out of my salary. I think the best thing to do is to get a part time job and that will cover me for the current year as well,” she said.

I warned her that that was another area fraught with possible problems. “You see, as your income exceeds $130,000 your tax rate on additional dollars earned is 39 per cent up to $180,000 and 47 per cent after that, including Medicare levy. 

“If all you do is complete a new TFN declaration form and tick ‘no’ for question 8 for your part-time employer, which says: ‘Do you want to claim the tax-free threshold from this payer?’ Even if you do this correctly you will still be undertaxed because the tax is deducted at a rate which is lower than the rate you need to pay. 

“So I suggest that you contact that pay office in writing and ask them to deduct 40 per cent of your earnings for tax. That should be sufficient to stop you having a large bill at the end of the 2024 financial year and I would hope that you even get a refund, assuming that you have repaid your current debt.”

“Thank you Gail,” Izzie said. “Now I understand where it all went wrong. I won’t make the same mistake again.”

If you have any queries on your HELP debt or taxation on a second job, contact the expert tax team at Gail Freeman & Co Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au