HELP Debt

Do you have a HECS-HELP debt? Changes to repayment thresholds and indexation may affect when and how long it takes you to pay off your loan:

• The minimum income for repayments has lowered from $51,957 to $45,881 starting 1 July 2019… again. 
• The income brackets that determine your repayment rates are changing.
• Repayment rates will be based on your income, with brackets from the minimum repayment to a maximum at $131,989.
• Repayments are capped at 10 per cent of income for those earning more than $131,989 annually. 
• Repayment indexation will be based on the Consumer Price Index, instead of Average Weekly Earnings. 

Is it good or bad for young people?

Bad.

This may mean that you now have HELP repayments for the first time, despite earning the same amount last year. Similarly, changes to repayment rate thresholds may mean your repayments are higher than they were previously. These will place a higher burden of low income earners and young people entering the workforce. 

Young people with multiple sources of income may need to be careful not to receive a surprise debt next tax time, as employers might not be withholding the right amount for your repayments. One way to prevent this is to estimate your repayments using a calculator like this one.

More information on The Guardian and from the StudyAssist website. 

Super

On 1 July 2019, the Federal Government’s ‘Protecting Your Super’ package comes into effect. These new laws are designed to protect people from paying unnecessary fees and reduce insurance premiums.  However, they also come with some risks for accounts with low balances. Here’s how you’ll be affected:

• For superannuation accounts with balances below $6,000, there is now a 3 per cent cap on admin and investment fees.
• Exit fees from superannuation accounts are also banned, meaning you can switch supers without fear of losing money in the process.
• Accounts with balances under $6,000 that have been inactive for 16 months will be transferred to the Australian Taxation Office.
• Inactive accounts (regardless of their balance) that haven’t received contributions for 16 months or longer may lose their default life insurance cover. If your account is inactive, you’ll need to make a contribution or contact your superannuation company to prevent this.

Is it good or bad for young people?

Mixed.

The scrapping of exit fees and caps for low-balance accounts are positive, and will help you to build up your super in the early stages. However, changes to life insurance cover may impact young families and parents trying to ensure they are able to leave their loved ones some of the few assets they’re able. 

More information from the Australian Taxation Office.

Health Insurance

Changes are being made to how health insurance is categories to help consumers understand them and what’s on offer. The Federal Government is bringing in new standard guidelines for health insurance after a review found the majority of Australians struggled to understand health insurance coverage policies.

• Health insurance will now come in four tiers: Gold, Silver, Bronze and Basic.
  • These tiers will have minimum standards for what is included in each.
  • Insurers have until 1 April 2020 to ensure their products align with this new system.
  • Any additional coverage already provided by insurers won’t be required to reduce to meet tier requirements. 
• Medically necessary breast surgery & gynaecology access will now be included in Bronze tier hospital treatment products and above.
• From 1 April 2019, insurers have the option to offer people aged 18–29 years discounts of up to 10 per cent of their private health insurance hospital premiums. People will retain that discount until they turn 41, when it will be gradually phased out.
  • The allowable discount will be two per cent for each year that a person is aged under 30, to a maximum of 10 per cent for 18 to 25 year olds.
  • If a policy offers age-based discounts they will be available to both new and existing policy holders.
  • Your insurer should tell you if, and how, they will apply this change.

Is it good or bad for young people?

Good.

These changes should make it much easier for anyone, regardless of age, to understand health insurance. Standardising offers should create simplicity and assist you to make a choice that’s right for you. We’d really prefer to see Medicare significantly expanded (dental & optical, anyone?) rather than continue to rely on private insurance, but these are positive changes nonetheless. 

More information from PrivateHealth and the Department of Health. 

Tax

If you pay tax, there are changes to how you’ll be lodging your tax return and receiving information from your employer. These changes can be difficult to understand, so here’s a quick rundown of what’s different. 

• You’ll no longer be given a payment summary  by your employer. Information on your income and tax will now be replaced by an ‘income statement’.
• Tax information will also be pre-filled for you by the ATO via MyGov. 
  • If you use a tax agent to lodge your return, the ATO provides this information to them and they lodge it as normal.
  • If you lodge your own return online with myTax, the payment summary information will be pre-filled into your return.
• You will no longer be sent a private health insurance statement by your health provider, this will also be pre-filled on myGov.

Our verdict:

Mixed.

It remains to be seen how these changes will impact people in real terms. It’s clear that by removing payment summaries and pre-filling information, it will become a lot more difficult to process your tax returns offline, and will encourage more to use an online myGov account to process your tax return. 

Income statements do not have to be provided by employers until 31 July so the ATO has encouraged anyone paying tax to wait until after this date to lodge their return so that the information can be fully updated by banks, health funds, employers and government agencies. Lodging earlier than this runs the risk of having incorrect tax information and as a result owing additional money.

More information from the Australian Taxation Office. 

Banking 

A new Banking Code of Practice has come into effect that binds all the major banks in Australia under a new set of rules. These rules were developed in response to the findings of the Banking Royal Commission. The major ones you’ll be impacted by are:

• Banks are now required to offer low-fee or no fee accounts to customers who ask for them, and who meet eligibility requirements (such as those on lower incomes). 
• Banks must inform customers with credit cards when their introductory offers are about to run out.
• Banks can no longer repeatedly contact you to offer things like unsolicited increases to your credit card limit, charge commissions on certain types of insurance, or sell insurance with credit cards and personal loans at point of sale. 
• Banks will now be required to provide customers with a list of direct debits and recurring payments if asked for in order to make it easier to switch banks. 
• Banks will no longer be able to charge individuals who have passed away with ongoing fees for the services they’re not getting anymore
• Monitoring and enforcement of these codes will be conducted by Banking Code Compliance Committee, and any of your complaints about your service with a Bank can be made to the Australian Financial Complaints Authority and used in a court of law.

Our verdict:

Mixed. 

Banking in Australia requires a lot of work — we saw that in the Royal Commission over the last few years — so we’re pleased to see these reforms focus on preventing exploitation of vulnerable people. However, whether they have a real effect or not will depend on how well they’re enforced. 

Violations of the Code of Practice can be addressed through the Australian Financial Complaints Authority and used in a court of law.

More information from the ABC and AusBanking.  

Other

There are a few other changes happening as we enter the new financial year beyond the big stuff. 

• New minimum wage of $19.49 per hour, an increase of 3 per cent (or roughly $21 a week).
• Penalty rates in the restaurant, pharmacy, fast food, retail and hospitality awards will see their Sunday, public holiday and late night shift rates cut for the third time in three years.

Our verdict:

Bad. 

These shifts are going to make life tougher for young people on minimum wage and in these youth-dominated industries. The Cost of Living has risen significantly in recent years, and this increase to the minimum wage comes nowhere near close enough to what’s necessary. A minimum wage doesn’t mean a living wage! 

Losses to penalty rates as well are devastating to young people who require the extra income to make ends meet. 

The reasoning behind these cuts is that they will stimulate the economy and job growth — we doubt it. Triple J’s hack has a great breakdown here about how that line of reasoning doesn’t hold up.