Tax experts on the 20 per cent HECS-HELP discount and your tax return

Australia Broadcast Center

4 days ago

The Labor government promised to reduce all HELP debts by 20 per cent if they were re-elected. They were (in case you missed it).
Tax season is now upon us and people with student loans have likely discovered their HECS (Higher Education Contribution Scheme) or HELP (Higher Education Loan Program) debt hasn't shrunk when they log in to the Australian Taxation Office (ATO) app or website.
It has actually increased.
Are you confused or have questions about your tax return and your HELP debt? We asked tax and finance experts for their advice.
The Australian Government's Department of Education says if you have — or perhaps had — "an outstanding HELP or other student loan debt balance as at 1 June 2025" it will reduce that debt by 20 per cent.
It has not been legislated yet, but the Albanese Government says the reduction will be the first piece of legislation introduced when Parliament returns on July 22.
The Department of Education says the ATO will then apply the cut retrospectively.
Indexation of 3.2 per cent was applied to student loan debts on June 1, which happens every year.
The Department of Education says indexation "is the law and an automatic part of student loan administration".
The indexation rate is calculated using whichever is lower out of the Consumer Price Index (CPI) or Wage Price Index (WPI).
It used to be calculated using only the CPI, but the system was changed last year to avoid shock increases.
But the Department of Education says the 20 per cent reduction will be applied to student loan debts before the most recent indexation (on June 1), with indexation to be recalculated according to that lower amount.
"The 20 per cent reduction will be calculated based on what a person's HELP debt amount was as at 1 June 2025, before indexation was applied.
"This means that indexation would apply only to the remaining loan debt balance … after the HELP debt has been reduced by 20 per cent."
If your income is above the threshold for making compulsory study loan repayments (it now starts at about $56,000), your employer should be withholding funds (like tax) to pay back your loan.
The pay as you go (PAYG) withholding scheme means that while funds have been withheld every pay cycle, repayments are only deducted from your study debt once you have lodged your tax return.
As to when to file your tax return, Andrew Gardiner, spokesperson for the National Tax and Accountants' Association, says "In simple terms, people don't need to do anything differently."
Jarrod Rogers, a certified practising accountant, agrees and says there's no advantage to delaying the lodgement of your 2025 tax return, assuming the reduction goes ahead as promised.
The Department of Education says you won't need to do anything to see the cut to your study debt, it will be handled by the ATO once the legislation passes.
If you are lodging your tax return yourself the deadline is October 31.
The Department of Education says the reduction "applies to your debt as at 1 June 2025" and the amount will not be affected by "voluntary repayments made after this date".
"This means that there may be circumstances where the 20 per cent reduction results in a credit to your HELP account, which may be refunded if you have no outstanding tax or other debts to the Commonwealth."
Mr Rogers says "you'll still see the benefit" if you have lodged this year's tax return and cleared your HELP debt.
He expects it will be similar to the changes made to indexation, when there were months between the announcement and the ATO crediting accounts.
If you still have an outstanding study debt, the Department of Education says the government will communicate when the 20 per cent reduction has been applied (after the legislation has passed).
Mr Rogers recommends thinking of it "as a long-term advantage" if you're years from paying off your HELP debt completely. "The lower balance means fewer future repayments."
He says indexation is expected to apply immediately after the 20 per cent reduction.
"Let's say you owed $30,000 in HELP debt on 1 June 2025. The [20 per cent] waiver would bring that down to $24,000, but then indexation of 3.2 per cent would apply, making it $24,768. So, in effect the reduction to your debt will be 17.44 per cent."
Mr Gardiner says he will be interested to see the final legislation.
"I think for the majority of people … nothing will change other than when they jump on MyGov website and there will be an adjustment to their HECS-HELP [debt]."
This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.