Going Overseas? What Happens To Your HELP Debt Repayments

It used to be quite common for Australians who take out Study and Training support loans, such as HELP (Higher Education Loan Program) loans, VSL (Vet Student Loans) and TSL (Trade Support Loans - now know as Australian Apprenticeship Support Loans scheme) loans to build their skills and then move overseas either temporarily or permanently. Often, as part of the move, they stopped making repayments on their loans because they were no longer in the Australian tax net.

From 1 July 2017, anyone living overseas and earning above the minimum repayment threshold is required to make loan repayments - just as they would if they were living in Australia. From that date, if you live overseas you need to work out all your worldwide income and submit the details to the ATO by 31 October each year so that your loan repayment can be calculated.

Unfortunately, as is usually the case when it comes to tax, the rules are complicated and it's essential that you get it right so here's our guide on how to declare your worldwide income if you're affected.

Convert your overseas income to Australian dollars

All amounts must be converted to Australian dollars before being reported, using the average annual exchange rate for the financial year most closely corresponding to the Australian income year.

There are three methods you can use to calculate your repayments; make sure you choose wisely!

Your worldwide income is used to determine any compulsory repayment and/or overseas levy that applies. The ATO gives taxpayers three alternative ways to work out their worldwide income, so you'll need to ensure you use the method that produces the best outcome for you:

Method One: Simple Self-Assessment Method

Using this method, you report the gross amount of your overseas income and claim a standard deduction (pre-determined by the ATO based on your occupation).

TIP: If you have incurred expenses against your overseas income which would be deductible under Australian tax law, you may get a better result using the comprehensive tax based assessment method (below).

Method Two: Comprehensive Tax Based Assessment Method

It's a long-winded name but this method essentially allows you to work out your net income in the same way you would if you were reporting Australian income, using normal Australian tax rules.

So, you'll report your total foreign income and can then claim deductions against it that would be allowable under Australian law (such as self-education costs, travel expenses, work-related uniforms and so on).

Method Three: Overseas Assessment Method

Using this method, you report the amount that appears on your most recent foreign income tax assessment. That is, your income for tax purposes according to the tax assessment received from the taxation authority of the foreign country that made the assessment (eg, HMRC in the UK or the IRS in the USA). You can't claim any deductions (you'll already have claimed any deductions you were entitled to under the law of the foreign country where you live to arrive at the income on your foreign assessment).

This method can be used where the tax year of the foreign country you live in is different to the Australian tax year. For example, the UK tax year runs from 6 April to 5 April the following year; the overseas assessment method can be used in this situation, provided the period of the overseas assessment overlaps the relevant Australian tax year and the most recent assessment has not already been used to work out your foreign-sourced income for a previous income year. This method cannot be used if you have received foreign income tax assessments from more than one foreign country for the period of 12 months that overlap with the income year.

You'll also need to include information such as:

• Your foreign tax identifier (the equivalent of an Australian Tax File Number for the country where you live)
• The foreign tax return country code
• The financial year for the foreign country where you live. If the overseas income year is from 1 January to 31 December, select the relevant calendar year. If the overseas income year covers 12 months over two calendar years, select the later year. For example, for the UK tax year running from 6 April 2023 to 5 April 2024, select 2024.
• The start and end date of the foreign tax year.

How to lodge

You can lodge with one of our tax agents here at H&R Block; given the potential complexity of the reporting requirement, that's an option that many are choosing to take.