HECS-HELP Repayment Thresholds 2025-26: Rates, Indexation & Tips

For the 2025-26 income year, compulsory HECS-HELP repayments kick in when your repayment income reaches $67,000 (up from $54,435 in 2024-25). Repayment income includes taxable income, total net investment losses, reportable fringe benefits, reportable super contributions, and any exempt foreign employment income.

A new marginal system applies: you repay only on the income above each threshold, not on your whole income. The rates are 15c per dollar between $67,000 and $125,000, then $8,700 plus 17c per dollar between $125,000 and $179,285, then 10% of total repayment income above $179,285. At a salary of $70,000, your compulsory repayment is 15% of the $3,000 above the threshold — about $450 per year. At $90,000, it works out to about $3,450 per year.

At $120,000, the repayment is about $7,950 per year. Your employer withholds these amounts from your pay based on the HELP information you provide on your Tax File Number declaration. The amount withheld is reconciled when you lodge your tax return. A one-off 20% reduction was also applied to all HELP balances on 1 June 2025.

HECS-HELP debts are indexed annually on 1 June based on the Consumer Price Index (CPI). In June 2023, the indexation rate was 7.1% — the highest ever — which added thousands of dollars to balances and sparked enormous public backlash.

A $30,000 debt grew by $2,130 overnight. In response, the government legislated changes from June 2023 onwards: indexation is now applied at the lower of CPI or the Wage Price Index (WPI). For June 2024, this meant indexation of approximately 4.0% (WPI) instead of 4.7% (CPI), and the change was backdated to June 2023, effectively refunding the excess indexation from that year.

The practical impact: a $30,000 debt indexed at 4% adds $1,200 per year, while at 3.5% it adds $1,050. If your compulsory repayments are lower than the indexation amount, your debt can grow even while you're making repayments — a frustrating situation for lower-income earners with large debts. Understanding this dynamic is essential for deciding whether voluntary repayments make sense.

The government removed the voluntary repayment bonus (previously 5–10% discount) in 2017, which means there's no longer a financial incentive to make voluntary repayments beyond your compulsory amount. Your HECS debt is an interest-free loan indexed to CPI/WPI — effectively the cheapest debt you will ever have.

This bit matters. At current indexation rates of 3.5–4%, your HECS grows more slowly than money invested in a high-interest savings account (5.0–5.5%) or the share market (historical average 7–9%). In purely mathematical terms, you're better off investing any surplus cash rather than paying off HECS faster. The exceptions: if your debt is causing you psychological stress, if you're approaching the income threshold and want to eliminate the debt before your repayment rate jumps, or if you plan to move overseas permanently (debts remain and are adjusted for exchange rates).

For most graduates, the optimal strategy is to make only compulsory repayments and direct any additional money toward higher-interest debts, super, or investments.

Your HECS-HELP debt interacts with your tax return in several ways. When you lodge your return, the ATO calculates your actual repayment income and determines the correct repayment amount.

If your employer withheld too much during the year (common if you had variable income), you receive the excess back as a tax refund. If too little was withheld — for example, if you had a second job, investment income, or capital gains that pushed your repayment income higher — you will owe additional repayment with your tax assessment. If you're starting a new job, you must notify your employer on your TFN declaration that you've a HELP debt so they withhold the correct amount.

Failing to do this results in a large bill at tax time. If you've both a HECS-HELP and a SFSS (Student Financial Supplement Scheme) debt, the combined repayment rate may be higher. The ATO's online services through myGov show your current HELP balance, year-to-date repayments, and historical indexation applied.

Don't skip this part. While you can't avoid compulsory repayments (they're automatically withheld from your pay), you can manage the impact strategically. Salary sacrifice into super reduces your taxable income but doesn't reduce your repayment income — the ATO adds reportable super contributions back when calculating your HECS repayment.

This is a common misconception. Investment property losses do reduce your taxable income but are also added back to repayment income. Essentially, the ATO has closed most loopholes for reducing HECS repayments.

The strategies that do work: if you're just above a threshold, making a tax-deductible donation or claiming all legitimate work-related deductions can push you into a lower repayment bracket. If you're going on parental leave or expecting lower income, check whether your repayment income will drop below $67,000 — if so, you may not owe any repayment for that year. For couples, ensuring the lower-income earner holds the HECS debt (through study planning) minimises repayments.

If you're moving overseas for more than six months, you must lodge an overseas travel notification with the ATO and make repayments based on worldwide income.

HECS-HELP debt directly reduces your borrowing power because lenders include the compulsory repayment as a liability when assessing your capacity to service a mortgage. A salary of $90,000 triggers a compulsory repayment of approximately $3,450 per year under the marginal system, which reduces your borrowing power by roughly $25,000–$35,000 depending on the lender's servicing calculation.

The practical side: If you're close to the maximum borrowing amount you need, paying down or paying off your HECS before applying for a home loan can push you over the line. However, paying off $50,000 of cheap indexed debt (3.5–4%) to marginally improve borrowing power is rarely optimal — that $50,000 could instead be your deposit or offset balance. The better strategy is often to reduce other, more expensive debts first (credit cards at 20%, personal loans at 10%) and discuss your specific situation with a mortgage broker who can model the impact of your HECS balance on different lenders' servicing calculators.

Some lenders are more HECS-friendly than others.