Paying Back HECS? Here’s How the New Rules Affect You
We love sharing good tax updates and trust us this one’s a biggie. From 1 July 2025, the rules around compulsory repayments for HELP/HECS-style debts are changing. The goal? Make them fairer and more in line with how we already pay tax. Here’s the lowdown.
What’s Changing?
1. The threshold is going up
You’ll now only be required to start repaying once your repayment income hits $67,000 (that’s up from $54,435 in 2024/25).
2. It's going marginal
Repayments will no longer apply to your entire income and only to the portion above $67,000. Think of it like tax brackets.
3. New repayment rates for 2025/26
15c for each dollar earned between $67,001 and $125,000
$8,700 + 17c on every dollar between $125,001 and $179,285
If your income is $179,286 or more, your compulsory repayment stays at 10% of your total repayment income (that’s so you won’t be worse off under the new system)
Note: These brackets (aside from the $179,286 top line) will be indexed each year with average weekly earnings.
What It Means for You
Smaller compulsory repayments for many people, your repayment from the 2026 tax return onward may shrink.
If your income is $67,000 or less, you might not have to make a compulsory repayment at all.
If you're in the top bracket (≥ $179,286), you won’t be hit harder because of the change.
(You can play with your own numbers using the Department of Education’s reduction & repayment estimator).
How It Affects Your Pay
Since compulsory repayments are tied into your tax:
Employees: your employer’s withholding (tax tables) will be updated meaning less might be withheld for repayments each period. If extra was already taken, it’s likely to be refunded when you lodge your 2026 tax return (assuming no other debts).
PAYG instalment payers: the changes kick in from 1 July 2026. Any overpaid amounts in 2025–26 will come back at assessment. You can also adjust your instalments if you expect a lower compulsory repayment.
For example if you were earning $80,000 in 2025–26:
Before the change: You would have paid around $2,800 (or 3.5% of your income)
After the change: you only pay 15% on the income above $67,000 → that’s $1,950
That’s a saving of $850 each year, or about $32 extra each fortnight.
The Takeaway
These changes are a win for fairness. By moving to a marginal model (just like income tax), compulsory repayments align better with how we already think about earnings. Many will benefit from lower repayments, especially in the middle-income brackets.
If you’d like a hand running numbers for your situation, or figuring out how your pay could be impacted, the Fenwick team is here to help!