If you’re one of the millions of Australians with a HELP (student) loan, here’s some very welcome news. The government is giving everyone with an existing balance a 20% cut in what they owe. Plus, new changes have been introduced to make repaying your student debt fairer.
What’s changing?
20% off your HELP debt
As at 1 June 2025, the Government will wipe 20% off the balance of all eligible student loans, including HECS-HELP, FEE-HELP, VET Student Loans, and others. You don’t need to apply or lodge anything; the Australian Taxation Office (ATO) will handle the process automatically.
For example, if your debt was $30,000 on 1 June 2025, it will be reduced to $24,000. Indexation (the yearly adjustment for inflation) will then only apply to that smaller amount.
Fairer repayment thresholds
From 1 July 2025, you’ll only need to start making compulsory repayments once your income reaches $67,000 (up from $54,435 in 2024–25). On top of that, repayments will now work on a marginal basis. That means you’ll only pay a percentage on the portion of income above the $67,000 threshold, not on your entire income.
The rates for the 2025-26 income year are as follows:
- 15 cents for every dollar of your repayment income that exceeds $67,000 up to $125,000
- $8,700 plus 17 cents for every dollar of your repayment income that exceeds $125,000 up to $179,285
- 10% of your total repayment income if it is $179,286 or more.
Here’s how it looks in action: Earn $80,000? You’ll pay 15% of the $13,000 above $67,000 = $1,950 (instead of the old $2,800).
This is a huge shift, especially for younger Australians, since around 70% of HELP debtors are under 35. The change will also provide some major relief for young medical and healthcare professionals who often carry some of the highest HELP debts.
Why this matters and what’s next.
Student debt is a big burden during some of the most important years of your life, when you might be saving for your first home, planning a family, or building your career. Cutting balances by 20% and easing repayment pressure gives you more breathing room to focus on your next steps.
The ATO will start applying the 20% reduction in stages, aiming to complete most cases before the end of 2025. Some more complex loans may take until early 2026. You’ll get notified once your account has been updated, and you can check your balance anytime via myGov.
Planning opportunities: repay before indexation
While the 20% reduction is automatic, there’s still room to be strategic. One smart move is making a voluntary repayment before the next indexation date on 1 June 2026. Here’s why: once you lodge your 2025 tax return, you’ll know your position and can consider using some of your savings to chip away at your HELP balance before indexation hits. Even a modest repayment can save you money long-term by reducing the amount subject to indexation.
At Cutcher & Neale, we can help you calculate the “sweet spot” repayment – the amount that delivers the biggest saving, even after factoring in a small fee for our review. This strategy works especially well if you’ve got cash reserves you won’t need until your tax refund arrives in July.
Think of it as getting ahead of the game: use your savings smartly now, avoid unnecessary indexation, and then replenish your account when your refund comes through.
Want to know your sweet spot repayment? Chat with our team today and we’ll help you make the most of the changes. Make sure to book in before February 2026 so we have time to review before indexation hits.
FAQs
Do I need to do anything to get the 20% reduction?
No, you don’t. The ATO will adjust your balance automatically.
Should I hold off on lodging my 2025 tax return?
No, you should lodge your 2025 tax return as normal. There is no benefit in delaying lodgement as the reduction is based on your loan balance as at 1 June 2025.
What if I already paid off my HELP loan after 1 June 2025?
The reduction is based on your balance as at 1 June 2025. If you paid it off after that date, you may be entitled to a credit or refund.
Will this affect my ability to defer future study fees?
Yes, in a good way. Once the 20% reduction is applied, your available HELP balance will also be re-credited.
When will I see less tax withheld from my pay?
Updated tax tables will apply from 1 July 2025, so your employer should automatically adjust your pay. If too much tax was withheld in the meantime, you’ll get it back when you lodge your 2026 tax return.
Nick brings a diverse set of skills to the specialist medical services team, combining his extensive taxation and financial reporting experience with his knowledge of the medical and dental accounting industries.
Nick started his career as a trainee with Cutcher & Neale in 2005. As a member of our Specialist Medical Services Division, Nick works closely with all of our Doctors in Training to deliver the WealthStart program. His experience in identifying key focus areas for our Doctors in Training is central in advising the best strategies as you launch into your financial journey.
