HECS Repayment Changes 1 July 2026: New Threshold Explained

If you have a HECS-HELP debt and you have looked at your first payslip of the 2026-27 financial year, your study loan deduction may have changed. From 1 July 2026 the compulsory repayment rules use a marginal system and an indexed threshold of $69,528 (up from $67,000), so the amount withheld from your pay is calculated differently to the old whole-of-income method. This post explains the new system, the 2026-27 rates, and what to check on your payslip.

Yes, if your income is above the threshold. From 1 July 2026 there is no compulsory HELP/HECS (STSL) repayment on income up to $69,528, and a repayment of 15 cents per dollar applies to income above that. The big change is how it is calculated: under the marginal system you only repay on the income above the threshold, not on your whole income. If you earn under $69,528 in repayment income for 2026-27, you have no compulsory repayment, and your employer should not be withholding study-loan amounts once your annual income is below that level.

The threshold lift comes from the standard annual indexation. The Australian Taxation Office (ATO) confirms the marginal repayment method now applies, with the thresholds indexed each financial year (ato.gov.au, Study and training loan repayment thresholds and rates).

The marginal system charges your compulsory repayment only on the income above each threshold, exactly like income tax brackets. Under the old system, your repayment was a flat percentage of your entire repayment income, so crossing the threshold by even $1 triggered a charge on the whole amount. Under the marginal system, earning just over the threshold means you only repay 15 cents on those extra dollars, not a percentage of everything you earned.

This shift took effect from the 2025-26 income year and rolls forward into 2026-27 with indexed thresholds. According to WealthWorks, the change "only taxes income above the threshold," which lowers repayments for most borrowers compared with the old whole-of-income percentage method (wealthworks.com.au).

For 2026-27 (income earned from 1 July 2026), the first repayment threshold is $69,528, with 15 cents in the dollar applying above it, then a higher marginal rate on income above the second threshold, capped at 10% of total repayment income at the top. The table below shows the 2026-27 bands against the 2025-26 bands so you can see the indexation.

The 2025-26 bands are confirmed by the ATO: nil up to $67,000, 15c per $1 from $67,001 to $125,000, then $8,700 plus 17c per $1 over $125,000, and 10% of total income at the top (ato.gov.au). The 2026-27 first threshold of $69,528 reflects the 2.8% indexation applied in 2026; the second-band and top-band thresholds are also indexed each year, so confirm the exact upper figures on the ATO page before relying on them.

Because the study-loan PAYG withholding tables changed for the new financial year. The ATO updates Schedule 8 (the statement of formulas for calculating Study and Training Support Loans components) and the STSL withholding tax tables, and the updated formulas apply to payments made from 1 July 2026 (ato.gov.au, Schedule 8). Your employer plugs your pay into those formulas each payday, so when the threshold lifts to $69,528 and the marginal bands move, the amount withheld from your first July payslip moves with them. Many borrowers just under the new threshold will see study-loan withholding stop entirely.

This is the second STSL withholding change in a short span: the marginal-system withholding schedule first took effect mid-2025-26 (from 24 September 2025), and the 2026-27 indexed tables took over from 1 July 2026 (ato.gov.au, Study and training loans – what's new).

For most borrowers, yes, and lower earners benefit the most. Consider 2026-27 repayment income of $80,000. The compulsory repayment is 15% of the amount over $69,528, which is 15% of $10,472, or about $1,571 for the year. On $100,000 it is 15% of $30,472, or about $4,571. Under the old whole-of-income method, a $100,000 earner repaid a flat percentage of the full $100,000, which was thousands more.

Note that a small group of middle-income earners (roughly $85,000 to $150,000) can pay marginally more than they would have under the old brackets in some cases, because of where the rates sit (wealthworks.com.au). Either way, the compulsory amount is calculated on your "repayment income," which is your taxable income plus reportable items such as reportable super contributions, total net investment losses and reportable fringe benefits, not just your salary.

These are three separate changes that all land close together. The 20% one-off reduction was applied to HELP balances as they stood before the 1 June 2025 indexation, cutting roughly $8,000 off a $40,000 debt. Indexation of 2.8% was then applied to remaining balances on 1 June 2026 (velofy.com.au). The repayment changes covered here are different again: they affect how much you must repay each year and what comes out of your pay, not the size of the debt. We cover the indexation and the 20% cut in detail in our HECS indexation 1 June 2026 and 20% HECS reduction guides.

Check three things. First, look at your July payslip and confirm the study-loan (STSL) line matches your expected income band. Second, make sure you have told your employer you have a HELP debt by ticking the study-loan question on your tax file number declaration, so the right amount is withheld across the year and you do not get a bill at tax time. Third, if your income is below $69,528 and study-loan amounts are still being withheld, ask your payroll team to check they are using the 2026-27 tables. You can verify your balance and the official rates with the ATO and through our guide to checking your HECS in ATO online services.

This article is general information, not financial or tax advice. Confirm the current thresholds and your own balance with the ATO before making decisions such as voluntary repayments.

What is the HECS repayment threshold for 2026-27?

For the 2026-27 income year (from 1 July 2026), the first compulsory HELP/HECS repayment threshold is $69,528, up from $67,000 in 2025-26. There is no compulsory repayment on income up to that amount, then 15 cents in the dollar applies above it. The figure reflects the 2.8% indexation applied in 2026.

Why has my HECS deduction changed on my July payslip?

From 1 July 2026 the ATO's updated Schedule 8 study-loan (STSL) withholding formulas apply, using the new $69,528 threshold and the marginal repayment bands. Your employer calculates the deduction each payday from those formulas, so the amount withheld changes with the new financial year. Borrowers just under the threshold may see study-loan withholding stop.

What is the marginal HECS repayment system?

It charges your compulsory repayment only on income above each threshold, like income tax brackets, rather than as a flat percentage of your whole income. So earning just over $69,528 means you repay 15 cents on the extra dollars only, not a percentage of everything you earned. It lowers repayments for most borrowers, especially lower earners.

Do I still repay HECS if I earn under $69,528?

No. If your repayment income for 2026-27 is at or below $69,528 you have no compulsory HELP/HECS repayment, and study-loan amounts should not be withheld once your income is below that level. Repayment income includes taxable income plus reportable items such as reportable super and fringe benefits, not just salary.

Is the repayment change the same as the 20% debt cut?

No, they are separate. The 20% reduction was a one-off cut to HELP balances before the 1 June 2025 indexation. The 2.8% indexation was applied on 1 June 2026. The repayment changes affect how much you must repay each year and what comes out of your pay, not the size of your debt.