When attending university in Australia, you can apply for a HECS-HELP loan to assist with your education expenses. However, you may wonder what happens to my HECS debt if I die and whether it’s necessary to consult a wills and estate lawyer to address HECS repayments in your will.
Understanding the implications of HECS debt is crucial, especially in the context of deceased estates. Keep reading to learn more about how HECS debts are managed after death and their impact on your estate. For more information on the HECS-HELP scheme and its purpose, you can visit the Australian Government’s website here.
What is HECS-HELP?
HECS-HELP consists of two components: it serves as both a loan and a student discount.
For instance, if you qualify as an eligible student, the Australian Government will cover your course fees through the HECS-HELP scheme, which raises the question, what is HECS-HELP? The government disburses the loan amount directly to your educational institution.
Repayment of the HECS debt occurs through the Australian taxation system once your income exceeds a specific threshold ($51,550 for the 2023-24 financial year and $54,435 for the 2024-25 year). You can also make voluntary repayments at any time, regardless of your income level. This leads to inquiries such as, what happens if I never pay my HECS debt?
Importantly, many people wonder, does HECS debt die with you? In fact, HECS debt does not transfer to your estate after death. If you pass away, what happens to HECS debt when you die is that it is effectively cancelled, so your estate is not responsible for repayment.
A HECS-HELP debt is incurred immediately after the chosen ‘census’ date for any university course for which you have opted to receive HELP assistance. Understanding how HECS works in Australia can help clarify any concerns regarding HECS debt after death.
How Does HECS Debt Repayment Work?
HECS debt is distinct from traditional debt for the following reasons.
- You only start paying it off once you earn over the HECS-HELP debt repayment threshold (currently $51, 550 for the 2023-24 financial year).
- Your repayments are based on your income, not the remaining balance.
- There is no interest (besides the rate of inflation adjustments).
- It doesn’t count as a loan when you borrow money – only the impact on your income after repayments is considered by a bank.
What happens to my HECS debt if I die?
Yes, your HECS debt is written off when you die. The executor of your will is responsible for lodging all outstanding tax returns up to the date of your death. If the notice of assessment includes a compulsory HECS debt repayment, that amount must be paid from your estate. However, beyond this requirement, your HECS debt is forgiven when you die, meaning that any remaining debt is cancelled.
Why are changes being proposed to the HECS debt scheme?
The Government has announced significant changes to the way HECS-HELP loans will be indexed, effective from 1 June 2023. Under the new provisions, the indexation of HECS-HELP loans will use the lower of the Consumer Price Index or the Wage Price Index, marking a shift from the current method that relies solely on the CPI for indexation.
If this goes ahead, will it impact what happens to my HECS debt if I die?
Under this new legislation, any remaining HECS debt is still written off after death, meaning your estate is not liable for repayment. If you have any questions regarding HECS debt and your estate planning, an estate planning lawyer will be able to clarify what these changes will mean for you.
Consult With Owen Hodge Lawyers
Owen Hodge Lawyers are closely monitoring the developments regarding HECS and are ready to assist you with any questions about the proposed changes to HECS-HELP or any aspect of your legal and financial plans. Whether you need guidance on HECS debt repayment, eligibility, or how HECS works in Australia, our wills and estates lawyers can provide the information you need. Please contact us at 1800 770 780 or email us at [email protected] for expert assistance.