Understanding The 20% HECS-HELP Debt Reduction

As part of its re-election commitment, the Federal Government has passed legislation to reduce all outstanding HECS-HELP debts by 20%. The Bill passed the Senate on 31 July 2025 and will come into effect once it receives Royal Assent. The reduction will be applied retrospectively to student loan balances held as at 1 June 2025.

While many borrowers have recently seen their loan balances increase due to the 3.2% annual indexation, the Government has confirmed that the 20% discount will be calculated based on the loan amount before indexation was applied.

How the Reduction Will Work:

Once the legislation is in effect, the Australian Taxation Office (ATO) will automatically apply the 20% reduction to eligible student loan accounts. Indexation will also be recalculated using the reduced loan balance, delivering further relief for borrowers.

This change builds on previous reforms that now link indexation to the lower of the Consumer Price Index (CPI) or Wage Price Index (WPI), rather than CPI alone, an approach designed to ease the financial pressure on graduates.

Lodging Your Tax Return:

If you’re getting ready to lodge your tax return, you don’t need to delay. The ATO will automatically apply the discount in the coming months. If you’ve fully repaid your student loan since 1 June 2025, you may be eligible for a refund equivalent to the 20% discount (subject to any other outstanding tax liabilities).

Other Changes to Student Loan Repayments:

The legislation also introduces changes to repayment thresholds. From 1 July 2025, the minimum income threshold for compulsory student loan repayments will increase from $54,435 to $67,000, making repayments more equitable.

If you have any questions about how these changes may affect you or your tax return, please get in touch with CoggerGurry today, we’re here to help.

Tel: 03 5571 0111

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Start Your Year-End Payroll, Tax And Employee Leave Planning Now

By Cogger Gurry • November 13, 2025

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By Cogger Gurry • November 13, 2025

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By Cogger Gurry • November 13, 2025

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