One quirk of the HELP repayment system is that, on reaching each repayment threshold, the debtor pays a % of their entire income. England and New Zealand followed Australia in creating income contingent student loans. But their repayment systems are based on a % of their income above the threshold – they have marginal rate systems. The Australian income tax system also uses marginal rates.
The Universities Accord final report HELP repayment recommendations include ‘moving to arrangements based on marginal income’.
As explained below, this Accord change would reduce ‘effective marginal tax rates’ – the loss of disposable income on each dollar above the threshold. Under the current system, EMTRs can exceed 100%…
