HECS-HELP Repayment Thresholds 2025-26: Rates, Indexation & Tips
Everything you need to know about HECS-HELP repayment thresholds for 2025-26, including the new rates, how indexation works after the recent controversy, and strategies to manage your student debt.
Current HECS-HELP repayment thresholds for 2025-26
For the 2025-26 income year, compulsory HECS-HELP repayments kick in when your repayment income reaches $54,435. Repayment income includes taxable income, total net investment losses, reportable fringe benefits, reportable super contributions, and any exempt foreign employment income. The repayment rates are progressive: 1% on income between $54,435 and $60,739, rising through several brackets to 10% on income above $151,201. At a salary of $70,000, your compulsory repayment is approximately 2% of your repayment income = $1,400 per year ($53.85 per fortnight withheld by your employer). At $90,000, the rate is 3.5% = $3,150 per year. At $120,000, the rate is 6% = $7,200 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 — you may receive a refund or owe additional repayment depending on your actual income versus withholding.
How HECS-HELP indexation works after the controversy
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 are making repayments — a frustrating situation for lower-income earners with large debts. Understanding this dynamic is essential for deciding whether voluntary repayments make sense.
Voluntary repayments: when they make sense
The government removed the voluntary repayment bonus (previously 5–10% discount) in 2017, which means there is 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. 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 are better off investing any surplus cash rather than paying off HECS faster. The exceptions: if your debt is causing you psychological stress, if you are 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.
HECS and your tax return: what you need to know
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 are starting a new job, you must notify your employer on your TFN declaration that you have a HELP debt so they withhold the correct amount. Failing to do this results in a large bill at tax time. If you have 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.
Strategies to manage your HECS-HELP debt
While you cannot avoid compulsory repayments (they are automatically withheld from your pay), you can manage the impact strategically. Salary sacrifice into super reduces your taxable income but does not 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 are 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 are going on parental leave or expecting lower income, check whether your repayment income will drop below $54,435 — 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 are moving overseas for more than six months, you must lodge an overseas travel notification with the ATO and make repayments based on worldwide income.
Should you pay off HECS before buying a house?
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 $50,000 HECS debt at a salary of $90,000 triggers a compulsory repayment of approximately $3,150 per year, which reduces your borrowing power by roughly $25,000–$35,000 depending on the lender's servicing calculation. If you are 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.
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General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.
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