On May 19th, 2020, we changed how the system calculates Study and Training Support Loans (STSL) in payroll runs. Previously we calculated this figure using taxable earnings; now, they are calculated using repayment income. From August the 9th, 2021, another change will allow employees to choose whether they would like these calculations based on their taxable earnings or repayment income.
Questions
- Why did we provide two STSL calculation methods?
- If the ATO states we should calculate STSL on total taxable earnings, then why do so many people choose to calculate it as Repayment Income?
- What new changes occurred on 9th August 2021?
- How can we configure or update an employee's STSL calculation method?
General
Why did we provide two STSL calculation methods?
Before the changes in May 2020, when our system calculated STSL on taxable earnings, a lot of customers requested that we base calculations on repayment income. When we changed this to repayment income, a lot of customers requested that we revert this to taxable earnings. As such, although the ATO's advice states that you should do this via taxable earnings, we have provided both methods to allow businesses to decide for themselves.
If the ATO states we should calculate STSL on total taxable earnings, why do so many people choose to calculate it as Repayment Income?
When you lodge a tax return, we will consider all other income outside salary and wages earned by the employee during the financial year when determining the total STSL amount. Because it can often be challenging to keep track of all other income during the financial year, an employee may choose to add a buffer to the STSL amount deducted from each pay. The intent of this method, so they do not have a tax bill at the year-end time.
However, selecting this repayment method is still not foolproof; many factors determine what is considered reportable income, such as reportable fringe benefits, and total net investment losses. So employees should make themselves aware of their obligations regarding these components and consider withholding extra taxes from their pay to cover any potential STSL debt incurred.
STSL Changes
What new changes occurred on 9th August 2021?
New STSL Calculation Method Setting
For any employee who declares they have an accumulated STSL debt on their Tax File Declaration (TDFD), the employer can set the STSL calculation method. You can do this on an individual Employee basis via the Employee TDFD Screen, as follows in the below screenshot. Additionally, you can configure this setting in bulk using the employee import/export file. We have also added a new column called StslCalculationType, you can find after the existing column StslDebt.
Default STSL Calculation Method
We will default to the Calculate STSL on Taxable Earnings method for employees added to the platform or any previously incomplete employees completed from the 9th August 2021, who have an STSL debt. We choose this default option to follow the ATO's advice.
Employers can always change an existing employee's STRL calculation method when the new setting becomes available. To make sure we do not affect existing employees STSL calculations by this change, we will set these employees calculation method to Calculate STSL on Repayment Income. To clarify, this applies to any employees with the Has accumulated STSL debt checked before the 9th of August 2021 and includes any terminated employees with an STSL debt if you later reactivate their profile.
How can we configure or update an employee's STSL calculation method?
The default calculation method assigned to an employee will depend on the date they were added (as a complete employee) to the platform. Additionally, please note that new STSL calculation settings are not available when adding an employee with an STSL debt to the platform through any of these methods.
- Add Employee Wizard
- EmployeeUnstructured API
In this case, we will apply the default calculation method to their wage. You can change it through the Tax File Declaration screen or by importing them from an external data source (such as Excel). If you are importing via spreadsheet file and want to reset wages for all existing employees, then please specify Taxable Earnings for all columns under Wages & Salaries by selecting 'Repayment Income' from the dropdown list.