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Oooh, HECS!

hecs help loan loans student loan Jan 15, 2026

Oooh, HECS!

A friendly guide to tax, PAYG, and kissing HECS debt goodbye.

HECS, or HECS-HELP, is a type of study and training support loan offered by the Australian government. You may be eligible for a HECS-HELP loan if you attend an approved higher education provider – that is, a provider eligible to offer Commonwealth Supported Places (CSPs) and HELP loans… like most Universities. The government then pays part of your fees in a CSP, and the remaining amount not covered by the subsidy, called the student contribution amount, is paid by the government through a HECS-HELP loan. You then owe this amount back to the government.

The bad news? With most loans, we end up paying back more than what we originally received.

That also applies to HECS-HELP. While it does not incur interest, the amount increases through indexation. Indexation is an adjustment applied to your debt on 1 June every year. This ensures that the amount you borrowed today is worth the same in the future – accounting for the rising cost of providing education over time.

The good news? We actually have four points:

Indexation only applies to HECS debt that is older than 11 months.
Repayments are income-based. You do not have to make mandatory payments until your income reaches a certain threshold.
Indexation rate cap. In November 2024, legislation was passed to cap the indexation rate to the Consumer Price Index (CPI) or the Wage Price Index (WPI), whichever is lower. This is to make sure that HELP debts increase in line with wages, and not faster.
20% debt reduction. If you have a student debt balance as of 1 June 2025, this will be reduced by 20% before indexation is applied. The ATO will handle this automatically – no forms or applications are required.

Repayments for HECS-HELP

The great thing about HECS-HELP is that you don’t have to start paying it back straight away, and not out of your money physically in the bank. It all gets sorted out as part of your tax return.

Repayments are income-based, which means compulsory repayment is required only when your income reaches a certain amount. In the 2025–26 income year, the threshold is $67,000. You can check thresholds here.

Income includes:

Salary and wages from your job(s)
Income from business or self-employment
Investment income

Each year, the ATO checks your income when you lodge your tax return and calculates how much you need to repay. If your income is below the threshold, you won’t have to make any compulsory repayments.

If you are an employee, you need to notify your employer about your HECS loan (tick the box on the tax declaration form) and authorize them to withhold amounts (PAYG deduction) from your regular pay to cover your compulsory repayment. Once you reach the income threshold, your employer automatically adjusts your PAYG withholding to include your compulsory HECS repayment. This means it’s included in the amount your employer withholds from your gross pay. You get sent a little less to work with every week, but the ATO collects the HECS bit directly from your employer.

Even if your income hasn’t reached the repayment threshold yet, you can choose to make voluntary repayments on your HECS-HELP loan at any time. Doing this before 1 June can reduce the balance used for the next indexation period. Voluntary payments are applied in addition to your compulsory repayments – they are separate payment transactions, but both reduce your HECS balance.

You can make voluntary repayments online through the ATO, or by setting up a regular payment if you prefer to spread it out. Even a small voluntary repayment each month can help reduce your HECS balance. Think of it as a way to get ahead on your loan while keeping your repayments manageable.

HOT TIP!!

Tip: Think of PAYG withholding as a way to automatically save for your HECS repayment throughout the year. If you have multiple jobs or your income isn’t fully taxed through PAYG, you might still need to set aside extra money for your repayments. Think of it as part of your overall tax and budget planning – it keeps things stress-free when tax time rolls around.

HECS obligations while overseas

If you move overseas or live outside Australia, here’s what you need to know:

Complete an Overseas travel notification and update your contact details – mobile, international residential, postal and email addresses – within 7 days of leaving Australia if you intend to (or already) reside overseas for 183 days or more in any 12 months.
You must report your worldwide income to the ATO while living overseas.
Your repayments are calculated in the same way as if you were in Australia.
You’ll need to make payments directly to the ATO if you’re not being taxed through PAYG withholding.

Tip: Keep your contact details and overseas address updated with the ATO. This helps avoid missed notices or repayment calculations while you’re abroad. It’s also a good idea to plan ahead for currency conversions so your repayment is correct when it reaches the ATO.

Deferring HECS repayments

While compulsory repayments are required, there are ways to give yourself a break if you’re going through challenging times – think of it as a temporary safety net. The ATO allows you to defer or amend loan repayments in certain circumstances.

Defer – delay or temporarily pause a repayment
Amend – pay a lesser amount than originally required

You can defer your loan repayments for the following reasons:

Settling the repayment would put you in financial hardship
You are affected by:

natural disasters
death or serious illness, and
other special circumstances considered serious or difficult

To support your claim to defer your loan repayment, you need to submit a detailed statement of your household cash flow to the ATO. The ATO may also require you to provide further evidence to support your income and expenses, such as a copy of your recent payslip.

How to save for tax (and your HECS repayment)

Even though HECS-HELP repayments are income-based, they affect your tax planning – especially if you have multiple income streams, are a sole trader, or don’t have enough tax withheld through PAYG. But don’t worry – avoiding surprises at tax time is easy with these four steps:

Understand your PAYG withholding
If you’re an employee, your employer automatically deducts tax from your salary, which usually covers both your income tax and compulsory HECS repayment once you reach the threshold. Make sure you’ve informed your employer about your HECS loan so your withholding is correct.
Set aside extra if needed
If you have multiple income sources – such as a few jobs, being a sole trader, or other businesses and investments – it’s smart to set aside an extra portion of your income regularly. This way, when you lodge your tax return, you’ll have enough to cover both income tax and HECS repayments without stress.

Example:

Employer A - you earn $40k (under the HECS threshold, so no HECS withheld from pay)
Employer B - you earn $20k (under the HECS threshold, so no HECS withheld from pay)
Sole Trader profit - $20k (you self manage so no one else is putting money aside for you)

Tax Position @ End Of Year:

Each individual income source thinks you are under the HECS threshold, so no extra money has been withheld from your pay
When you lodge your tax, it is clear your total taxable income is ~$80k ($40k + 20k + 20k), which is over the HECS repayment threshold
You end up with a decent ‘tax bill’ owed to the ATO, a large portion of which is HECS you owe because your total collective income is over, and there’s been no pre-payments or money put aside for HECS already by you or your employers.

Track your income, expenses, and repayments
Keep a record of your income and expenses throughout the year. Tracking your income will help you see when you’ll hit the repayment threshold, while properly recording your deductible expenses can reduce the amount of compulsory repayments. This allows you to plan your cash flow and avoid last-minute tax surprises.
Consider voluntary HECS payments
Making voluntary repayments can reduce your balance before indexation and help lower future repayments. Think of it as a tax-smart strategy: you’re essentially paying off part of your loan ahead of time, making your annual tax obligations more manageable.

HECS-HELP might seem a little overwhelming at first, but once you understand how repayments work, how PAYG withholding helps, and how voluntary payments can give you a head start, it’s really just part of your overall tax and budgeting plan.

By keeping track of your income, expenses, and repayments – and staying aware of thresholds and options like deferrals – you can manage your loan with confidence and avoid last-minute surprises. Think of it as a mini tax plan: being informed, organized, and proactive will make HECS repayments feel a lot less stressful and help you keep your finances on track. Plus, with a few smart moves like voluntary payments, you can say goodbye to HECS loans faster and enjoy that extra peace of mind knowing you’re ahead of the game. Learn more about saving for tax here.

Goodbye HECS, hello freedom!