HECS repayment thresholds: how the new marginal system works
From 2025–26 you repay 15c per dollar over $67,000 — not a slab of your whole income. Here's the new system, indexation, and the 20% cut.
HECS repayments were completely redesigned in 2025–26, and the new system is genuinely better for almost everyone earning under $180,000. If your mental model is the old "percentage of your whole income" ladder, it's time to replace it.
The 2025–26 marginal system
| Repayment income | Repayment |
|---|---|
| $0 – $67,000 | Nil |
| $67,001 – $125,000 | 15c for each $1 over $67,000 |
| $125,001 – $179,285 | $8,700 plus 17c for each $1 over $125,000 |
| $179,286 and over | 10% of your total repayment income |
The key word is marginal — you repay only on income above the threshold, exactly like tax brackets. On $80,000, the repayment is 15% of $13,000: $1,950. Under the old system the same salary repaid $3,200 (4% of the whole lot), so the change left middle earners hundreds or thousands better off per year.
It also killed the infamous cliff: previously, crossing a threshold by one dollar could add hundreds to your bill. Now an extra dollar earned costs at most 17 extra cents — until $179,286, where the system switches to a flat 10% of your entire repayment income.
"Repayment income" is more than salary
Repayments are calculated on your repayment income: taxable income plus reportable fringe benefits (at their grossed-up value), reportable super contributions, and investment losses added back. This is why salary packaging and super sacrifice — which lower your taxable income — can still raise your HECS bill. Our salary sacrifice calculator models that interaction.
Indexation: the other half of the equation
Every 1 June the outstanding balance is indexed. Since the Universities Accord changes, the rate is the lower of CPI and the Wage Price Index — 3.2% in 2025 and 2.8% in 2026. Indexation isn't interest, but it compounds like it, and if your compulsory repayment is smaller than the year's indexation, your balance grows despite repaying.
The one-off 20% reduction of HELP balances (as at 1 June 2025) was applied before that year's indexation. If you've checked myGov since mid-2025, it's already in your balance.
When will you be done?
That depends on the tug-of-war: balance, salary, salary growth and indexation. A $28,000 balance on a $75,000 salary takes over a decade at typical settings; the same balance on $110,000 clears in about four years. The HECS payoff calculator runs your actual numbers, including what voluntary repayments would save.
This guide is general information only, current at the date shown — not tax or financial advice. Rules and rates change; check ato.gov.au or a registered tax agent for your circumstances.