Answer
Lightning Payroll automatically calculates Study and Training Support Loan (STSL) repayments for employees with an outstanding education debt. This covers all loan types treated as STSL by the ATO:
- Higher Education Loan Program (HELP/HECS)
- VET Student Loans (VSL)
- Student Financial Supplement Scheme (SFSS)
- Student Start-up Loan (SSL)
- Trade Support Loan (TSL)
Enabling STSL Withholding
To make sure STSL is withheld correctly, tick the STSL option on the employee's tax settings.
In the desktop app: go to the Employees tab, select the employee, open Tax Rates >> Tax Settings, and tick Deduct STSL (HELP, TSL, SFSS, etc.). Save the changes.
In the online (web/mobile) app: go to Employees, select the employee, open the Tax >> Tax Settings tab, and tick Deduct STSL (HELP, TSL, SFSS, etc.). Save the changes.
Lightning Payroll follows the ATO's STSL tax scales and adjusts repayments automatically when the ATO updates the thresholds via a tax table update.
What Happens When an Employee Salary Sacrifices?
Salary sacrifice (for example, into superannuation) reduces an employee's taxable income for PAYG withholding purposes. However, when the ATO calculates the required STSL repayment at the end of the financial year (EOFY), it uses repayment income, which adds the salary-sacrificed amounts back in.
This can lead to a situation where:
- Little or no STSL is withheld during the year because taxable income is lower.
- At EOFY the ATO assesses the higher repayment income and calculates a larger compulsory repayment.
Voluntary Repayments
Voluntary repayments an employee makes during the year do not reduce the compulsory amount recalculated at EOFY. Even after voluntary payments, the ATO still calculates the required repayment from the employee's repayment income. Employees should make voluntary repayments directly through their MyGov account, following the ATO's guidelines.
Worked Example: Falling Below the Threshold
These figures are illustrative only. For the current thresholds and rates, check the ATO link below.
Amy earns $65,000 a year and salary sacrifices $10,000 into superannuation.
- Taxable income: $65,000 - $10,000 = $55,000
- Repayment income: $65,000 (includes the salary-sacrificed amount)
During the year, if her taxable income sits below the STSL repayment threshold, her employer may withhold little or no STSL. At EOFY, the ATO assesses her repayment income of $65,000 and may calculate a compulsory repayment that she must pay directly to the ATO.
Worked Example: A Shortfall at EOFY
Ben earns $70,000 a year and salary sacrifices $8,000 into superannuation.
- Taxable income: $70,000 - $8,000 = $62,000
- Repayment income: $70,000 (includes the salary-sacrificed amount)
His employer withholds STSL based on the lower taxable income during the year. At EOFY the ATO assesses the higher repayment income, which can fall into a higher repayment rate, leaving a shortfall Ben must pay directly to the ATO.
How Can Employers and Employees Manage This?
- Explain the difference: salary sacrifice lowers taxable income for PAYG withholding but does not lower the repayment income the ATO uses.
- Withhold extra: an employer can set an upwards variation to withhold additional tax each pay. In the desktop app, go to Employees >> Tax Rates >> Tax Settings and enable the Upwards variation checkbox. In the online app, go to Employees >> Tax >> Tax Settings and enable Upwards Variation. The extra amount is not reported as STSL/HELP on reports or payslips, but can still go towards covering the EOFY debt.
- Monitor repayment income: employees should review their taxable income, salary sacrifice amounts and expected repayment income to avoid surprises at EOFY.
What If an Employee No Longer Has an STSL Debt?
If an employee has repaid their STSL debt in full, they should notify their employer and update their tax declaration. Untick Deduct STSL (HELP, TSL, SFSS, etc.) on their Tax Settings (following the same path as above) and save the changes.
