Blog / How the HECS Repayment Threshold Works Out of Your Pay

How the HECS Repayment Threshold Works Out of Your Pay

By Alex, MoneySights editor · how this content is researched and reviewed

Published 2026-10-26 · last reviewed 2026-10-26

A HECS debt does not take a fixed slice of every payslip. A compulsory repayment is worked out once a year from a figure called repayment income, then compared with a threshold that is reset for each income year. For the 2026-27 income year that threshold is $69,528. The money withheld from your pay during the year is a running estimate of that annual figure, and the two can differ, sometimes in your favour and sometimes not. Below is the arithmetic, the five income lines the threshold is measured against, and where the annual figure and the payslip figure part company. Figures were checked against the ATO on 26 October 2026.

The threshold is measured against repayment income, not salary

The number that matters is called repayment income, and it is assembled from your tax return rather than read off an employment contract. The ATO publishes the minimum repayment income for 2026-27 as $69,528, and the comparison is made against that assembled figure rather than against gross salary (). Two people on identical salaries can therefore sit on different sides of the line. The threshold is not fixed either: the ATO states that the repayment thresholds are adjusted each year to reflect any changes in average weekly earnings (), and an income year runs from 1 July to 30 June.

The four bands for 2026-27, in the ATO's own terms

The published table has four lines. Repayment income up to $69,528 attracts a nil repayment. From $69,529 to $129,717, the repayment is 15 cents for each dollar over $69,528. From $129,718 to $186,050, it is $9,028 plus 17 cents for each dollar over $129,717. From $186,051, it becomes 10% of total repayment income (). The first three lines are marginal, so only the slice above each starting point is charged at that rate. The ATO states that "compulsory repayments are calculated using marginal rates", so the repayment is calculated only on the income above the minimum, because it is "not a single rate, rather a range of rates dependent on income".

Who it applies to, and the five lines it is built from

Every study and training loan type shares one threshold and one rate set, including HELP, VET Student Loan and the Australian Apprenticeship Support Loan, previously the Trade Support Loan. Holding more than one does not multiply the repayment; it is a single compulsory repayment, applied in a fixed order with HELP first (). As a general rule a compulsory repayment applies once repayment income exceeds the minimum, and the ATO says that happens even while you are still studying or undertaking an apprenticeship (). The five lines that make up repayment income are: taxable income, excluding any assessable First Home Super Saver released amounts; reportable fringe benefits, regardless of the exempt status of the employer; total net investment loss, including net rental losses; reportable super contributions; and exempt foreign employment income (). Salary sacrifice into super appears in that list as reportable super contributions, which is why it does not quietly move a repayment income below the threshold.

Worked example: an income just above the threshold

Take a repayment income of $80,000 for 2026-27. The first $69,528 carries no repayment. The remaining $10,472 is charged at 15 cents in the dollar: $80,000 minus $69,528 is $10,472, and 15% of that is $1,570.80 for the year. As a share of the whole $80,000, that works out at 1.96%. Run the same salary through the withholding schedule and, at $1,538 a week of earnings, the formula gives $30.29 before rounding, which the schedule rounds to $30 a pay, or $1,560 across 52 pays: a little under the annual figure. That is our arithmetic from the published coefficients, and the actual repayment is a single annual amount on a notice of assessment.

Worked example: the middle band, and why the top line joins it

At $130,000 of repayment income the figure is over the second line by $283. That slice is charged at 17 cents in the dollar, giving $48.11, and the fixed $9,028 is added: $9,076.11 for the year, or 6.98% of the whole income. The top band is where the table stops looking like a staircase. At $186,050 the calculation is $9,028 plus 17% of $56,333, which is $9,576.61 on top, so $18,604.61. At $186,051 the rule changes to 10% of total repayment income, which is $18,605.10. Crossing that one dollar lifts the repayment by 49 cents, and every dollar above it adds 10 cents. Both figures are our arithmetic from that table.

What changed in how repayments are calculated, and what did not

Before the 2025-26 income year the published rate was applied to total repayment income, so a 5.5% band meant 5.5% of everything: in 2024-25, $100,000 of repayment income meant $5,500 (). Under the 2025-26 marginal rule the same income repaid $4,950, and under the 2026-27 table it is $4,570.80. The ATO describes the change as repayments now being calculated only on the income above the minimum repayment threshold instead of the total repayment income (). The starting threshold has also moved: $54,435 in 2024-25, $67,000 for 2025-26, and $69,528 for 2026-27, with the 2025-26 figure set as part of that redesign. What did not change is the top of the scale, still a flat 10% of total repayment income, and the ATO recorded no change for people earning $179,286 or more in the year the marginal system began ().

How the repayment reaches your pay in the first place

The compulsory repayment is collected through the income tax system, and the extra deduction on a payslip exists because an employer was told about the loan. The ATO states that under pay as you go withholding an employer withholds an additional amount from salary and wage income to cover the compulsory repayment (). You provide it by ticking the loan question on a Tax file number declaration or a Withholding declaration (). The separate study and training support loans tax table then applies the same marginal shape to weekly earnings, with two sets of floors. Where the tax-free threshold is claimed at that job, nothing is withheld below $1,337 a week, then 15% of the slice above it applies, then 17% above $2,494, then 10% of the whole weekly amount from $3,577 (). Where the threshold is not claimed, the floors are lower: $987, then $2,144 and $2,727 (). The component covers bonuses and commissions but not lump sum termination payments. The first set of edges matches the annual edges divided by 52 and rounded down, so the $69,528 threshold becomes $1,337 a week, and the published fortnightly and monthly floors, $2,674 and $5,793.67, follow from that weekly figure. For a steady salary and no other repayment-income items, the withheld amount therefore tracks the annual figure closely. Withholding runs employer by employer, and a second job cannot also claim the tax-free threshold, so the lower scale applies: its floor is $987 a week, below which nothing is withheld, so withholding on that scale can start well below a full year at the annual threshold, and the annual repayment is still worked out on combined repayment income. Where repayment income includes reportable super contributions, reportable fringe benefits or a net investment loss, the payslip component is worked out on wages alone, so the annual figure can exceed what was withheld.

Why the payslip figure is an estimate, not the bill

The ATO's compulsory repayments page sets out where the payslip line and the assessment part company. You do not provide loan information in a tax return: if a loan is held at lodgment and repayment income is above the minimum, the ATO works out the compulsory repayment and includes it on the notice of assessment (). Amounts withheld are not applied to the loan account until the return is lodged and a compulsory repayment has been calculated: the balance does not reduce after each pay cycle, and the repayment is applied as a lump sum after lodgment (). So the payslip line is a running deposit and the assessment is the settlement, and any excess withheld may be refunded at lodgment where there are no other outstanding tax or Commonwealth debts (). One case is structural rather than timing: the ATO says you will not have to make a compulsory repayment if you have a spouse or dependants and, because of low family income, the Medicare levy is reduced or not payable, and in that case you may ask an employer not to withhold the additional amount by completing a Medicare levy variation declaration ().

What changes with a part year, business income, or a move overseas

Withholding ignores how many pays you will actually have. The weekly component is applied to each week actually worked, with no reference to the lower annual income those weeks add up to, so a part-year worker is generally over-withheld and the difference is settled when the return is assessed. Where business or investment income is involved, pay as you go instalments take the loan into account when the ATO works out an instalment amount and rate (). Moving overseas does not pause the loan. For HELP, VSL and Australian Apprenticeship Support Loan holders the ATO sets out an obligation to report worldwide income or lodge a non-lodgment advice (), and it asks for an overseas travel notification within 7 days of leaving if you intend to reside overseas for 183 days or more in any 12-month period. Indexation on the balance continues whatever the loan type.

Indexation sits on the balance while the repayment comes off it

The loan account moves in two directions for two different reasons. There is no interest charged, but amounts more than 11 months old are indexed on 1 June each year (), at the lower of the Consumer Price Index or the Wage Price Index (). The rate applied in 2026 was 2.8% (), and the ATO publishes the whole series. Against that, repayments reduce the balance. Voluntary repayments can be made at any time (), and the ATO notes that a voluntary repayment made before indexation is applied on 1 June may reduce the amount that gets indexed. They are in addition to any compulsory repayment still owed and they are not refundable. The order matters: indexation lands on 1 June, and the compulsory repayment is applied once the return is assessed. Balances held on 1 June 2025 also received a 20% reduction, recorded in , so an account can show a credit alongside the repayments.

Where to check your own numbers, and what to do if the flag is wrong

The ATO publishes a study and training loan repayment calculator that takes a repayment income figure and returns an estimate of the repayment for the year (). A notice of assessment carries the compulsory repayment that was actually applied, and ATO online services shows the loan account, including the indexation, reduction and repayment transactions (). Withholding only starts once an employer has been told about the loan; if it was never flagged, the compulsory repayment is still worked out at lodgment and arrives as one amount on the notice of assessment. If the payslip is deducting for a loan you have finished paying, the ATO's instruction is to complete a new Withholding declaration; where a Medicare levy reduction applies, ask for the variation described above. If the deduction lines are the least legible part, our guide to [reading a payslip](/blog/read-your-payslip) walks through gross pay, withholding and the gap between them. MoneySights covers mechanics rather than personal positions, and anything that turns on your own income, deductions or loan balance is a question for a qualified adviser. The working test is short: work out repayment income from the five lines, compare it with the threshold for the income year you are checking, which is $67,000 for 2025-26 and $69,528 for 2026-27, then check the loan account and the withholding declaration if the figures disagree.

Questions

Sources

• ato.gov.au — study and training support loans rates and repayment thresholds
• ato.gov.au — when must you repay your loan
• ato.gov.au — study and training support loans rates and repayment thresholds
• ato.gov.au — study and training loans what s new
• ato.gov.au — compulsory repayments
• ato.gov.au — study and training support loans weekly tax table
• ato.gov.au — schedule 8 statement of formulas for calculating study and training support loans
• ato.gov.au — overseas repayments
• ato.gov.au — view your study loan account online
• ato.gov.au — study and training support loans indexation rates
• ato.gov.au — voluntary repayments
• ato.gov.au — study and training loan repayment calculator

General information, not financial advice.