My employer takes HECS out of every pay — how is my repayment actually worked out now?

You finished study a few years ago and you've had a HELP debt quietly following you ever since. Your employer takes a bit extra out of each pay to cover it, so it mostly stays out of sight and out of mind — until tax time, when the return works out what you actually owe for the year. This year two things changed at once, and both of them are in your favour: the way the repayment is calculated has been rebuilt, and a big one-off cut has already come off the balance.

What changed: a marginal system, from your 2025–26 return

From the 2025–26 income year, the ATO calculates your compulsory HELP repayment using marginal rates. That means the repayment is worked out only on the income above the minimum threshold — not, as before, on your whole income. The 2025–26 return most people are lodging right now is the first one to use it.

The figures for 2025–26 run like tax brackets. There is no compulsory repayment on repayment income up to $67,000. From $67,001 to $125,000 you repay 15 cents for each dollar over $67,000. From $125,001 to $179,285 it's $8,700 plus 17 cents for each dollar over $125,000. Above $179,285 the repayment is a flat 10% of your total repayment income. The thresholds lift again next year — the tax-free line rises to $69,528 for 2026–27 — because they're indexed each year.

To see the mechanic: take a hypothetical worker on $80,000 of repayment income. Under the new marginal method the compulsory repayment is 15% of the amount over $67,000 — 15% of $13,000, which is $1,950. Only the slice above the threshold counts.

The old 'cliff', and why crossing a threshold no longer stings

The change matters because the old system had a cliff edge that quietly punished pay rises. Until 2024–25, once your repayment income crossed the minimum threshold — $54,435 that year, with a first rate of 1% — you paid that percentage on your entire income, not just the part above the line. Earn one dollar over the threshold and you owed a percentage of the whole lot; a small pay rise could leave you worse off after the extra repayment.

The marginal system removes that trap. Now the first $67,000 of repayment income carries no compulsory repayment at all, and only the income above it is counted — exactly like income tax brackets. A pay rise can still lift your repayment, but it can no longer swing a charge onto income you were already earning. For most borrowers the combined effect of the higher threshold and the marginal method is a smaller compulsory repayment than the old rules produced on the same income.

The 20% cut that's already happened

The second change is a one-off reduction. Under the Universities Accord (Cutting Student Debt by 20 per cent) Act 2025, 20% has been wiped off outstanding study and training loan balances. The reduction was applied to your balance as it stood on 1 June 2025, before that year's indexation — and the 2025 indexation was then recalculated on the lower amount, so the order of operations works in your favour.

You didn't need to do anything to get it. The ATO applied the cut automatically and has finished processing it for the debts that existed on 1 June 2025 — most people saw it land before the end of 2025, with more complex cases into early 2026. If you're not sure it reached your account, you can check your current loan balance through the ATO's online services via myGov.

The belief that still catches people: 'my employer already takes it out, so I'm square'

Here's the misconception that produces the nastiest surprises. The extra amount your employer withholds each pay for HELP isn't your actual repayment — it's a PAYG estimate that sits with the ATO until you lodge. Your real compulsory repayment is calculated on your return, and if the withholding didn't cover it, the shortfall shows up as a bill; if it covered too much, it feeds back into your assessment. The pay-slip deduction is a down payment, not the final number.

The other half of the trap is what 'income' means here. Your compulsory repayment is based on repayment income, which is more than your salary: it adds back reportable fringe benefits, total net investment losses (including net rental losses — so negatively gearing a property lifts this figure), reportable super contributions such as salary sacrifice, and exempt foreign employment income. Someone who looks under the threshold on salary alone can be over it once those are added — which is exactly how a HELP bill arrives out of nowhere for a careful person.

So the practical version is calmer than the rumours. Your loan balance is already 20% smaller than it was; your 2025–26 repayment is worked out marginally, only on income above $67,000; and the amount your employer withheld is squared up when you lodge, not before. The one thing worth doing is checking your repayment income — not just your salary — so a rental loss or salary sacrifice doesn't produce a repayment you didn't budget for.

This is general information current as at July 2026, not advice for your situation — how these rules apply depends on your income, your loan type and what sits inside your repayment income. If you have a HELP debt alongside an investment property, salary sacrifice or overseas income, working out your real repayment income before you lodge is far cheaper than being surprised by the result. That is what our individual tax return service is for.