Postgraduate University Fees The Advantages of a Fee-Paying Place
Fee paying courses do not have to be paid ‘up front’ and can have significant tax advantages!
What is a Fee-Paying place?
If you are offered a Fee-Paying place this means that the Commonwealth Government does not contribute to your course costs. Fees are based on the number of units you study and the year in which you commence. You may be eligible however for a FEE-HELP loan to help pay tuition fees.
What is FEE-HELP?
If you are offered a fee paying place you may request that the government pays for all or a portion of the costs which are then paid back through the tax system. This is known as a FEE-HELP loan. You must meet the eligibility criteria in order to obtain FEE-HELP. La Trobe University will provide you with the relevant forms and information with your enrolment pack if you are offered a place.
Fee paying students who are Australian citizens or holders of a Humanitarian Visa may receive a FEE-HELP loan. New Zealand citizens and Permanent Residents are not eligible for FEE-HELP.
If you are granted FEE-HELP, you must advise your employer that you have a Higher Education Debt as the government will take a small portion of your salary through the tax system until the debt is repaid. The debt will increase in line with the Consumer Price Index (CPI). You can access the relevant documentation at: http://www.ato.gov.au
Fee-Paying does not necessarily mean you have to pay ‘up front’
If you are an Australian citizen generally you don’t have to pay the fees for your full fee course ‘up front’. Instead, you can choose to defer the payment via the taxation system, currently called the FEE-HELP, replacing the PELS, OLDPS and BOTPLS.
If you already have a PELS debt (HECS or BOTPLS or OLDPS debt) you can still add a HELP debt to become one accumulated debt, but there is a maximum amount allowable (which is currently $100,000 - some conditions apply).
HELP repayment (which includes HECS) works through the taxation system as extra percentage points of taxation which are taken out on top of the normal taxation rate which applies to the amount you earn. The extra percentage points for repaying HELP works on a sliding scale depending on how much you earn, to a maximum of 8% of extra tax for anyone earning $73,960 or above. For instance, the extra HELP repayment for anyone earning $48,897 – $51,466 is 5%. As with HECS-HELP you can make voluntary payments and get a 10% discount.
Scenario
How do the tax rules and regulations affect the pay packet of a nurse?
It isn’t as complicated as it might seem and the golden rule is CHECK WITH YOUR TAXATION PROFESSIONAL FOR ADVICE FOR YOUR SPECIFIC CIRCUMSTANCES.
Note: The information in this case is for illustration purposes only and should not be relied upon. Generally, other factors will affect salaries such as the Medicare levy and people’s own specific circumstances. Please contact your accountant or taxation advisor.
The pay rates in the scenario below are worked out on the current standard rate1 for a 38 hour week. No allowances (e.g. uniform, shift, on call, penalty rates etc) have been factored in.
Charlie is a Registered Nurse grade 2 in his third year, his base pay rate is $866.20 per week. Charlie’s weekly take home pay in May 2008 is $710.19 which is calculated by:
| Gross annual salary | $866.20 x 52 weeks per year = $45,042.40 |
| Tax rate | $30,001-$75,000 = $3,600 + 30 cents for each $1 over $30,0002 |
| Annual tax payable | $8,112.72 |
| Weekly tax payable | $8,112.72 / 52 = $156.01 |
| Net weekly salary | $866.20 - $156.01 = $710.19 |
Charlie decides to study a Nurse Practitioner in Perioperative Nursing commencing at the end of February 2008. The cost of this course is $2,500 per 20 credit point unit and there are three units for the course. Charlie is working full time so he decides to study a part time load of two units in the first semester and the final unit in second semester.
Charlie enrols at La Trobe University’s Division of Nursing and Midwifery and chooses to defer payment of his course fees. So in late February he fills out a “2008 Income Tax Withholding Variation” form and gives it to his employer, The Acme Hospital. On receipt of the ITWV form The Acme Hospital start deducting additional payments to pay off Charlie’s FEE-HELP debt. Another advantage is if the course is viewed as tax deductible then there are a range of other associated expenses which may also be tax deductible; including books and stationery, depreciation on a computer, and possibly travel, however be careful, there are very specific rules relating to this provision. Charlie’s annual salary of $45,042 means that Charlie is in the salary bracket that pays an extra 4.5% of tax per annum to pay back his FEE-HELP debt. This means for Charlie an extra tax amount of $2,026.91 per annum, which is an extra tax deduction of $38.98 per week. The ATO website has a useful calculator which shows you how this works.
First Year Tax Advantages are Charlie can claim the cost of the two units he has studied which is $5,000 as a tax deduction for the income tax year ending 30/6/2008. Which results in a very welcome refund from the ATO when Charlie’s income tax assessment comes back from his accountant.(In fact Charlie is getting quite astute about the income tax business and he has claimed for his text books too, but we haven’t included these here as we did not wish to complicate matters!)
Second Year Tax Advantages are Charlie studies his final unit of his graduate certificate in the second semester 2009, which means that the cost of that unit $2,500 is a tax deduction for the income tax year end 30/6/2009, (plus any other qualifying self-education expenses). Charlie in the meantime is paying an extra $38.98 per week on top of his usual taxable rate (which will not vary until the debt is paid off or unless Charlie gets a pay increase or decrease); but, as an added incentive, under the ANF award3 when Charlie gains his Nurse Practitioner he is entitled to an automatic pay increase of $33 per week. If he goes on to study a Post Graduate Diploma the pay increase is $53.60 per week. With the tax advantages and the easy pay system that gives a pay rise before he has finished paying the debt, Charlie thinks this is a very easy way to invest in himself and his own professional future.
1 “Quick Reference Pay Rates – Registered Nurses Division 1” first pay period on or after 1 October 2006, ANF, as provided by the ANF 27th July 2007.
2 “Individual Income Tax Rates – 2008”, Australian Government, ATO, www.ato.gov.au
3 ANF 27/7/07.