HECS-HELP debt and student taxation in Australia in 2026 have undergone important changes — including the June 2025 legislation that reduced all existing HECS-HELP debts by 20% and changed the indexation method from CPI to the lower of CPI or Wage Price Index (WPI). If you have a HECS-HELP balance or are considering higher education, here is what you need to know about how student debt and taxation interact in 2026.

The 20% HECS-HELP Debt Reduction (2025)

In June 2025, the Australian Parliament passed legislation reducing all existing HECS-HELP, VSL, SSL, ABSTUDY SSL, and other income-contingent loan balances by 20%. This reduction was applied automatically — if you had a $50,000 balance, it became approximately $40,000. The reduction was not taxable income. The change also applied to the new indexation cap: from 2025 onwards, HECS-HELP indexation is limited to the lower of CPI or the Wage Price Index, preventing the large indexation spikes seen in 2023 (+7.1%) and 2024 (+4.7%).

HECS-HELP Repayment Thresholds 2025-26

HECS-HELP repayments are compulsory once your income reaches the minimum repayment threshold:

$54,435 - $62,850: 1.0% of total income
$62,851 - $66,620: 2.0%
$66,621 - $70,618: 2.5%
$70,619 - $74,855: 3.0%
$74,856 - $79,346: 3.5%
$79,347 - $84,107: 4.0%
$84,108 - $88,492: 4.5%
$88,493 - $93,968: 5.0%
$93,969 and above: Rates increase to a maximum of 10% of income

Repayments are calculated on your "repayment income" — a broader measure than taxable income that includes reportable fringe benefits, reportable employer super contributions, and total net investment losses.

Employer Withholding for HECS-HELP

Employers withhold additional PAYG to cover your HECS-HELP repayment obligation, provided you have declared your student debt on your tax file number declaration. If you have not declared your HECS-HELP debt to your employer, insufficient tax is withheld and you will have a tax debt when you lodge your return. Always tick the HECS-HELP box on your TFN declaration when starting a new job.

Frequently Asked Questions

Does HECS-HELP debt affect my tax return?

Yes. Your compulsory HECS-HELP repayment is calculated when you lodge your tax return based on your repayment income for the year. If your employer has withheld enough, the repayment is already covered. If not (e.g., you had multiple employers, investment income, or reportable fringe benefits pushing your repayment income higher), you will have an additional payment to make with your tax return assessment.

Does HECS-HELP debt affect getting a home loan?

Yes. Lenders include your compulsory HECS-HELP repayment as a debt obligation when assessing your borrowing capacity. For example, a $60,000 income earner with HECS-HELP debt has approximately $600/year ($50/month) in compulsory repayments — this reduces the amount you can borrow. Higher incomes with higher repayment percentages have a more noticeable impact on borrowing capacity. Paying off HECS-HELP voluntarily can improve your borrowing power, though there is no government bonus for doing so.

Have HECS-HELP or student loan questions? Contact AWTS — we help graduates navigate student debt repayment and tax return obligations.

HECS-HELP and Student Tax in Australia: 2026 Complete Guide