The Universities Accord final report proposes changing how HELP repayments are calculated. It recommends abolishing our current system, which levies a % of all income once an income threshold is reached. It would be replaced with a system that charges a % of income above the threshold – a marginal rate system.

A major reason given for this change was to end the ‘unfair situation’ of some HELP debtors having very high effective marginal tax rates. These can exceed 100% in some cases, so that an increase in taxable income results in lower disposable income. In addition to the fairness issues, high EMTRs can lead to people working fewer hours and less income tax revenue.

Other Accord final report comments, however, suggest HELP repayment redesign with purposes beyond the EMTR issue. While not specifying thresholds or marginal rates, the report suggests a system in which the ‘majority of HELP debtors who make a repayment … would repay less in a given year’. They warn, however, that a ‘small number of higher income debtors (likely less than 10% of HELP debtors) [would] make higher repayments in a given year’.

Subsequent Jason Clare media interviews suggest that policy thinking on repayment systems has moved beyond a general preference for a marginal rate system. Referencing unpublished research by Bruce Chapman, Clare said on the day the final report was released that ‘someone on an income of $75,000 a year would pay every year about $1,000 less.’ He gave the same example again this week.

Speaking to the SMH, Chapman expanded on how the new system might work. He envisaged a multi-rate marginal HELP repayment system: ‘a person earning $86,000 would only be taxed the 5 per cent repayment rate on the income above the threshold at which the rate kicks in, being $84,430. All income below that threshold would be levied at the lower rates.’ A multi-rate marginal system is also consistent with the Accord final report reference to some HELP debtors repaying more each year than they do now.

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