20% Reduction in HECS/HELP loans, and new ATO Rules for Repayments

Loan Reduction for All Existing Balances

The government announced at the last election that they would reduce most study and training support loans by 20%.

The one-off 20% reduction applies to all study and training support loans that existed on 1 June 2025. This reduction will be applied before indexation, meaning you’ll also benefit from a smaller indexation amount.

You don’t need to do anything, the ATO will automatically apply the reduction and notify you through MyGov, once processed.

Most reductions will be completed by the end of December 2025, with some complex cases finalised in early 2026.

You should still lodge your 2025 tax return as usual. If the reduction puts your account into credit, you’ll receive a refund (provided you have no outstanding tax or debts). Make sure your bank details and contact information are up to date with the ATO.

Higher Minimum Repayment Threshold

As of 1 July 2025, you don’t need to make compulsory loan repayments until your income reaches $67,000. This is a substantial increase from the 2024–25 threshold of $54,435.

Smaller Compulsory Repayments for Most People

For most, the compulsory repayments will be lower from their 2025–26 tax return onwards. Higher income earners will see smaller deductions throughout the year as tax tables are updated to reflect the new system. If too much tax has already been withheld, the difference will be refunded when you lodge your 2026 tax return.

If you pay your tax via PAYG instalments, these changes won’t take effect until 1 July 2026, but you can discuss varying your instalments with us to avoid overpaying.

New Marginal Repayment System

The repayment structure is now based on marginal rates, not your entire income. Previously, repayments were calculated on your total repayment income once you passed the threshold. Now, repayments apply only to the portion of income above $67,000, similar to how income tax brackets work.

If you earn $179,286 or more, your repayment rate remains at 10%, so you won’t be disadvantaged by the change.

If you’re unsure how these changes affect you, please contact our office to discuss, on 6652 2333.

– Brad Sheaves

Posted 11.11.2025

This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.