HECS/HELP debt explained: how repayments work
Most Australians with a HELP debt don't fully understand how it's calculated, why their employer withholds more than expected, or how it interacts with the rest of their finances. Here's a complete reference - updated for the significant 2025–26 reforms.
Last updated: April 2026 · ATO-aligned · General information only 12 min read
In this article
- What HECS/HELP actually is
- What changed in 2025 - and why it matters
- Repayment income - not the same as your salary
- How repayments are calculated in 2025–26
- Why your employer withholds more than you expect
- Indexation - how the debt grows
- Voluntary repayments - when do they make sense?
- Going overseas with a HELP debt
- How HELP debt affects your borrowing capacity
- How the thresholds change over time
- How HELP fits into a financial plan
- Frequently asked questions
What HECS/HELP actually is
HECS - the Higher Education Contribution Scheme - was the original name for Australia's university fee deferral system. It was replaced by HELP (Higher Education Loan Program) in 2005, though most Australians still call it HECS. Technically they're the same thing: a government loan that pays your university fees upfront, which you repay through the tax system once your income exceeds a threshold.
Unlike a bank loan, HELP debt carries no interest. Instead it's indexed to inflation each year on 1 June - so the real value of the debt is preserved over time, but it doesn't compound the way a personal loan or credit card does. This makes it one of the most favourable forms of debt available in Australia, which is why the conventional wisdom of "HELP debt is good debt - never rush to repay it" held for so long. That calculus has become more nuanced in recent years, particularly when inflation was running high.
The debt attaches to your Tax File Number and follows you for life until it's repaid - including if you move overseas.
What changed in 2025 - and why it matters
The 2025–26 financial year brought two of the most significant changes to the HELP system since it was introduced. If you have a HELP debt, both of these affect you directly.
1. A 20% reduction in all outstanding balances
In June 2025, the government applied a one-off 20% reduction to all outstanding HELP, VSL, and other study loan balances as they stood on 1 June 2025, before indexation. The reduction was applied automatically by the ATO - no application was required. For a borrower with the average debt of around $27,600, this represented roughly $5,500 wiped from the balance instantly.
20%
One-off reduction to all HELP balances, applied June 2025
$67,000
New minimum repayment threshold from 2025–26 (up from $54,435)
3.2%
Indexation rate applied 1 June 2025
2. A new marginal repayment system
From 1 July 2025, the way compulsory repayments are calculated changed fundamentally. Previously, once your income crossed the repayment threshold, a single flat rate applied to your entire income - creating a cliff effect where crossing a threshold by a single dollar could cost you thousands. The new system applies repayment rates only to income above the threshold, working similarly to income tax brackets.
This is fairer and more predictable - but it also means your employer's PAYG withholding estimates are likely to be higher than your actual obligation, particularly for people earning between $67,000 and $100,000. Expect a repayment-related credit at tax time if you're in this range.
Repayment income - not the same as your salary
This is one of the most commonly misunderstood aspects of HELP debt. The income figure used to calculate your repayment is not your salary, not your taxable income - it's a broader measure called Repayment Income (RI), which adds several items back in.
| Component | Included in repayment income? |
|---|---|
| Taxable income | ✓ Yes - the base |
| + Total net investment loss (incl. rental losses) | ✓ Added back |
| + Total reportable fringe benefits amounts | ✓ Added back |
| + Reportable super contributions (salary sacrifice) | ✓ Added back |
| + Exempt foreign employment income | ✓ Added back |
| − Assessable FHSS released amounts | ✗ Excluded |
The practical implication: salary sacrificing more into super does not reduce your HELP repayment income. Reportable employer super contributions - amounts you've directed to super above the standard employer contribution - are added back into the repayment income calculation. Many people expect salary sacrifice to lower their HELP bill and are surprised when it doesn't.
Similarly, if you own a negatively geared investment property, the rental loss reduces your taxable income but is added back for HELP purposes. Your repayment income will be higher than your taxable income as a result.
How repayments are calculated in 2025–26
From 1 July 2025, repayments are calculated only on income above $67,000 - using a marginal rate structure similar to income tax. The table below shows the rates for 2025–26.
2025–26 HELP repayment rates
| Repayment income | Repayment amount | Marginal rate on excess |
|---|---|---|
| Below $67,000 | Nil | 0% |
| $67,001 – $125,000 | 15c for each $1 over $67,000 | 15% |
| $125,001 – $179,285 | $8,700 plus 17c for each $1 over $125,000 | 17% |
| $179,286 and above | 10% of total repayment income | 10% (flat, total income) |
Note: the top tier ($179,286+) reverts to a flat 10% of total income - it acts as a ceiling rate rather than a marginal rate, to cap repayments at very high incomes.
Worked examples - 2025–26
| Repayment income | Calculation | Annual repayment |
|---|---|---|
| $60,000 | Below threshold | $0 |
| $80,000 | ($80,000 − $67,000) × 15% | $1,950 |
| $100,000 | ($100,000 − $67,000) × 15% | $4,950 |
| $140,000 | $8,700 + ($140,000 − $125,000) × 17% | $11,250 |
| $200,000 | $200,000 × 10% (flat rate applies) | $20,000 |
Why your employer withholds more than you expect
When you start a new job and indicate on your tax declaration form that you have a HELP debt, your employer begins withholding additional tax on top of your standard PAYG withholding. This extra withholding is an estimate of your annual repayment, spread across your pay cycles throughout the year.
The problem is that your employer only knows about the income they pay you - they have no visibility over your other income sources, investment losses, reportable fringe benefits, or salary sacrifice arrangements elsewhere. If your repayment income ends up being different from what your employer estimated, the difference is reconciled at tax time.
In practice this means two things:
- If you have multiple income sources - a second job, freelance income, significant investment income - your employer's withholding on the primary job may not cover your full HELP repayment. You could end up with a tax bill at lodgement time.
- Under the new marginal system, many employers are still withholding based on estimates calibrated to the old flat-rate system. This means people earning between $67,000 and $120,000 in particular may find they've had more withheld than required, resulting in a repayment credit when they lodge.
Always tell your employer about your HELP debt
If you don't tick the HELP debt box on your tax declaration form, your employer won't withhold any extra. Your compulsory repayment will still be assessed at tax time - but you'll owe the full amount as a lump sum rather than having it spread across your pay cycles during the year. For large debts or higher incomes, this can be a significant unexpected bill.
Indexation - how the debt grows
On 1 June each year, the ATO applies indexation to all HELP debt balances that are at least 11 months old. Indexation is not interest - but it functions similarly in that it increases your outstanding balance. The rate is set at the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI), based on the year to the March quarter.
This cap - the lower of CPI or WPI - was introduced from June 2023, following the 2023 indexation rate of 7.1% which caused widespread alarm. Before the cap, indexation could and did exceed wage growth, meaning debts could grow faster than people could pay them down in real terms. Recent rates have been more moderate:
| Year | Indexation rate | Note |
|---|---|---|
| 1 June 2023 | 7.1% | Pre-cap - CPI only, no WPI floor |
| 1 June 2024 | 4.7% | CPI/WPI cap applied; WPI was lower |
| 1 June 2025 | 3.2% | Applied after the 20% balance reduction |
Indexation is applied to your balance on 1 June, before your annual repayment assessment is processed. This means a voluntary repayment made before 1 June each year reduces the balance on which indexation is calculated - which is why the timing of voluntary repayments matters if you're choosing to make them.
Indexation is not interest - but it's also not free
The conventional wisdom that HELP is "free debt" was largely true when indexation was low and savings rates were higher. When CPI ran at 7.1% in 2023, people with large HELP balances were watching their debt grow faster than they could repay it. With the CPI/WPI cap now in place and the 20% balance reduction applied, the position is more favourable - but indexation remains a real cost that compounds over time if ignored.
Voluntary repayments - when do they make sense?
You can make voluntary repayments to the ATO at any time, in any amount, regardless of your income. They are not tax deductible. They reduce your principal balance immediately, which reduces the amount on which future indexation is calculated.
Whether it makes sense to repay HELP early comes down to comparing two rates: the effective cost of your HELP debt (essentially, the indexation rate) versus the after-tax return you could get by keeping the money elsewhere.
The trade-off - HELP repayment vs alternatives
| Alternative use of funds | Effective return | Beats 3.2% HELP indexation? |
|---|---|---|
| Mortgage offset account | ~6.0–6.5% (tax free) | Yes - significantly |
| High-interest savings account | ~3.5–4.5% pre-tax (~2.2–2.8% after tax at 37%) | Marginal - depends on rate |
| Extra super contributions | Tax saving at marginal rate (e.g. 32.5–47%) | Usually yes |
| Voluntary HELP repayment | Saves future indexation (~3.2% currently) | - |
For most people with a mortgage, the offset account wins - it saves home loan interest at a higher effective rate than indexation costs. Voluntarily paying down HELP early only starts to make sense if you have no mortgage, your savings rate after tax is below the indexation rate, or you are going overseas and want to clear the obligation before leaving.
The psychological argument for early repayment - getting rid of the debt for peace of mind - is legitimate. Just go in knowing the maths suggests you could be better off putting that money elsewhere.
Going overseas with a HELP debt
This is an area many Australians get wrong - often expensively. Your HELP debt does not pause when you leave Australia. Since 2017, Australians living overseas are required to make compulsory repayments based on their worldwide income, using the same thresholds that apply domestically.
If you plan to live or work overseas for 183 days or more in any 12-month period, you must:
- Update your contact details via myGov and submit an Overseas Travel Notification within 7 days of leaving Australia
- Lodge your worldwide income with the ATO each year by 31 October
- Make compulsory repayments if your worldwide income (converted to AUD) exceeds the repayment threshold
The debt continues to be indexed while you're away. An Australian earning a strong salary in London, Singapore, or New York and ignoring their HELP obligations can return home to find the debt has grown substantially through both indexation and accumulated repayment shortfalls - sometimes with penalties added.
The overseas HELP debt is a common and expensive mistake
Unlike in Australia where your employer handles withholding, when you're overseas you're responsible for reporting and paying yourself. Many expats assume the debt is dormant while they're away - it isn't. The ATO estimated there were over 40,000 Australians overseas with unmanaged HELP obligations in 2022. If you're planning to move or work abroad for an extended period, consult a tax agent experienced with expat obligations before you go.
How HELP debt affects your borrowing capacity
HELP debt doesn't appear on your credit file - but it does affect your ability to borrow for a home loan, and meaningfully so. Lenders include your compulsory HELP repayment in their serviceability assessment as a committed liability, reducing the amount they'll lend you.
A rough rule of thumb: every $1,000 in annual HELP repayment reduces your borrowing capacity by approximately $10,000. So if your annual HELP repayment is $5,000, your maximum borrowing capacity could be reduced by around $50,000 compared to someone with no HELP debt but otherwise identical circumstances.
Illustrative impact on borrowing capacity
| Repayment income | Annual HELP repayment | Approx. borrowing capacity reduction |
|---|---|---|
| $80,000 | $1,950 | ~$19,500 |
| $100,000 | $4,950 | ~$49,500 |
| $120,000 | $7,950 | ~$79,500 |
Borrowing capacity impact is approximate. Actual lender assessment varies by lender policy, interest rate buffer used, and other committed liabilities.
For this reason, some people choose to voluntarily repay their HELP debt before applying for a home loan - not because it's the optimal use of money in isolation, but because it can meaningfully increase what a lender will offer them. This is a decision worth modelling before you act on it.
How the thresholds change over time
The HELP repayment thresholds are indexed annually - historically in line with CPI, and now legislated to move with the lower of CPI or WPI. For long-run financial planning, Average Weekly Ordinary Time Earnings (AWOTE) is a useful proxy for wage growth and threshold movement, since thresholds are designed to keep pace with earnings over time.
This has a meaningful practical implication: if your income grows broadly in line with wage growth, your repayment as a proportion of income stays roughly stable. But if your income stays flat - or grows more slowly than wages - the thresholds rise past you, and your repayment falls. Conversely, if your income grows faster than wage growth, you move into higher repayment territory.
The projections below use 3.7% AWOTE - consistent with the wage growth rate Canwi applies to financial plan scenarios. Actual threshold movement will depend on the CPI and WPI outcomes each year.
Projected HELP repayment thresholds - 2025–26 to 2034–35
| Financial year | Minimum threshold | Tier 1 top (15% rate) | Tier 2 top (17% rate) |
|---|---|---|---|
| 2025–26 ✦ Current | $67,000 | $125,000 | $179,285 |
| 2026–27 projected | $69,479 | $129,625 | $185,919 |
| 2027–28 projected | $72,050 | $134,421 | $192,798 |
| 2028–29 projected | $74,716 | $139,395 | $199,931 |
| 2029–30 projected | $77,480 | $144,552 | $207,328 |
| 2030–31 projected | $80,347 | $149,901 | $215,000 |
| 2031–32 projected | $83,320 | $155,447 | $222,955 |
| 2032–33 projected | $86,402 | $161,199 | $231,204 |
| 2033–34 projected | $89,599 | $167,163 | $239,758 |
| 2034–35 projected | $92,915 | $173,348 | $248,630 |
Projections assume 3.7% AWOTE growth per year. Actual thresholds are set by the ATO each July based on the lower of CPI or WPI to the March quarter. These figures are indicative only.
What this means in practice - projected repayments at fixed income levels
The table below shows what your compulsory annual repayment would be each year if your income stayed flat - a useful way to see how threshold indexation gradually reduces the repayment burden over time at any given income level. The most striking result: someone on $75,000 today pays $1,200 in compulsory repayments in 2025–26 and falls below the threshold entirely by 2029–30, assuming their income doesn't grow.
| Financial year | $75,000 income | $100,000 income | $120,000 income | $150,000 income |
|---|---|---|---|---|
| 2025–26 ✦ | $1,200 | $4,950 | $7,950 | $12,950 |
| 2026–27 | $828 | $4,578 | $7,578 | $12,486 |
| 2027–28 | $442 | $4,192 | $7,192 | $12,004 |
| 2028–29 | $43 | $3,793 | $6,793 | $11,505 |
| 2029–30 | $0 ⬇ below threshold | $3,378 | $6,378 | $10,987 |
| 2030–31 | $0 | $2,948 | $5,948 | $10,450 |
| 2031–32 | $0 | $2,502 | $5,502 | $10,002 |
| 2032–33 | $0 | $2,040 | $5,040 | $9,540 |
| 2033–34 | $0 | $1,560 | $4,560 | $9,060 |
| 2034–35 | $0 | $1,063 | $4,063 | $8,563 |
Assumes income is fixed at each column's level across all years. In reality, most people's income grows - meaning their repayment income rises too and they don't benefit from threshold indexation to the same degree. Projections assume 3.7% AWOTE growth per year on thresholds. Indicative only.
The key insight: thresholds rising faster than some incomes
The minimum threshold is projected to reach $92,915 by 2034–35 - meaning someone earning below that level in a decade's time won't be making compulsory repayments at all. For lower and middle income earners whose wages don't keep pace with AWOTE, the annual repayment burden gets smaller each year in dollar terms - even if the debt balance itself is still growing through indexation. This dynamic is worth understanding when deciding whether voluntary repayments make sense for your situation.
How HELP fits into a financial plan
HELP debt is one of those things that quietly influences your finances for years without feeling urgent - which is exactly why it tends to be underplanned. A few things worth building into your financial plan explicitly:
- When will it be paid off? At current repayment rates and your income trajectory, model when the debt reaches zero. The answer is often later than people expect, particularly if income growth is slow in early career years.
- How does it interact with a home purchase? If you're planning to buy property in the next few years, understand the borrowing capacity impact and factor it into your deposit target and timeline.
- Is a voluntary repayment worth it? Run the comparison - HELP indexation rate vs the return you'd get elsewhere. For most people with a mortgage, offset wins. For those without, it's closer.
- What happens to cashflow when it's paid off? The annual HELP repayment is a committed outflow that disappears when the debt clears. For someone repaying $6,000 a year, that's a meaningful increase in disposable income - plan for it and decide in advance where it goes.
In Canwi, your HELP debt is entered as part of your current liabilities, and the compulsory repayment flows through to your cashflow projection. You can see exactly how it affects your take-home income year by year, when it clears, and what the cashflow looks like after.
Frequently asked questions
Does salary sacrifice reduce my HELP repayment?
No. Reportable employer super contributions - which include salary sacrifice amounts - are added back into your repayment income calculation. Salary sacrificing more into super will reduce your taxable income but not your HELP repayment income, so your compulsory repayment stays the same. This is one of the most common misconceptions about HELP debt.
Does my rental loss reduce my HELP repayment?
No. Net rental property losses reduce your taxable income but are added back into repayment income. If your taxable income is $85,000 after a $10,000 rental loss, your repayment income is $95,000 - not $85,000. The rental deduction provides an income tax benefit, but not a HELP repayment benefit.
Is HELP debt wiped when you die?
Yes. HELP debt is not passed to your estate or to your next of kin. It is extinguished on death. This is one of the genuinely distinctive features of HELP as a form of debt - it carries no risk beyond your own lifetime.
Can I check my HELP balance?
Yes - log into myGov and navigate to the ATO online services. Your HELP account shows your current balance, all transactions including indexation and repayments, and your annual repayment history. It's worth checking at least once a year, particularly around June when indexation is applied.
What if I earn above the threshold but my employer doesn't withhold enough?
Your compulsory repayment will still be assessed at tax time - the ATO adds it to your income tax assessment. If not enough was withheld across the year, you'll owe the shortfall when you lodge. If you think this applies to you (for example, because you have income from multiple sources), you can make a voluntary repayment before lodgement to reduce or eliminate the shortfall, or contact the ATO to arrange a PAYG instalment arrangement.
When was the 20% debt reduction applied?
The 20% reduction was applied to balances as at 1 June 2025, before the annual indexation. The ATO applied it automatically - no action was required from borrowers. The reduction was followed by 3.2% indexation, meaning the net effect was a balance approximately 17% lower than it would have been without the reduction. You can verify the adjustment in your ATO online services account via myGov.
Model your HELP debt in Canwi
Canwi includes your HELP debt as part of your current financial position and models the compulsory repayment through your annual cashflow - so you can see exactly when it clears, how it affects your take-home income year by year, and how it interacts with a property purchase or other major life event.
General information only. This article provides general educational information about HECS/HELP debt and is based on ATO guidance current as at April 2026. Repayment thresholds, rates, and indexation figures are updated annually. Always verify current figures at ato.gov.au and consult a registered tax agent for advice specific to your circumstances.
