HECS Thresholds 2026: What Changes from 1 July 2026?

Each financial year, the ATO adjusts HECS-HELP repayment thresholds and rate brackets to reflect changes in income levels. For the 2026-27 income year (starting 1 July 2026), the thresholds are expected to increase modestly in line with wage growth.

While the ATO typically confirms the updated thresholds in May or June each year, historical patterns suggest the minimum repayment threshold will rise from $54,435 (2025-26) to approximately $55,838 to $56,500 for 2026-27. The exact figure will be confirmed once the indexation is published.

The repayment rate structure (1% to 10%) is not expected to change — the legislative framework for these rates is set separately and has remained stable. What changes is the income level at which each rate applies.

Use our HECS Calculator to model different income scenarios and see your projected repayment for both 2025-26 and 2026-27.

The HECS indexation date is 1 June 2026. Under the reformed indexation system introduced in 2025, the rate applied will be the lower of CPI and the Wage Price Index for the relevant period.

Based on current economic conditions (CPI running at approximately 2.5% and WPI at approximately 3.2% for the year to December 2025), the June 2026 indexation is expected to be around 2.4 to 2.6%. This means a debt of $30,000 would grow by approximately $720 to $780 on 1 June 2026 if no voluntary or compulsory repayments have been made.

To avoid indexation applying to part of your balance, consider making a voluntary repayment before 1 June 2026 if your debt is small and you can afford to clear it. For larger debts, the maths on voluntary repayments versus keeping money in a high-interest account needs to be run carefully — see our full HECS repayment guide for a framework.

If your income in 2025-26 exceeded the threshold, your compulsory repayment was deducted via withholding through the year and finalised in your tax return. If you had insufficient withholding — common if you switched jobs, worked overseas, or had variable income — you may have a tax debt due in November 2026.

For 2026-27 planning:

• Notify your employer: When you start a new job, indicate on your Tax File Number declaration that you have a HELP debt. This ensures your employer withholds at the correct rate.
• Review your withholding: If you're expecting a significant income increase (promotion, bonus, second job), consider a withholding variation to avoid a large tax bill at year end.
• Multiple jobs: If you hold two jobs and each withholds HECS separately, your combined income may put you in a higher repayment bracket — but each job withholds as if it's your only job. This can lead to an underpayment at tax time.

HELP debt affects your borrowing capacity in two ways: lenders count the compulsory repayment as a committed expense reducing your net income, and some lenders count the total outstanding HELP balance as a liability on your financial statement.

For a borrower earning $90,000 with a $40,000 HELP debt:

• Compulsory repayment at 5% = $4,500 per year ($375 per month)
• This reduces your assessed income by $375/month for serviceability purposes
• At typical borrowing ratios, this can reduce your maximum borrowing by approximately $60,000 to $80,000

Paying down your HELP debt voluntarily before applying for a mortgage may increase your borrowing power — but weigh this against the opportunity cost of that cash. Speak to a mortgage broker about how lenders in your situation treat HELP debt.

Use our Borrowing Power Calculator to estimate the difference.

Will the HECS threshold definitely change in 2026-27?
Yes — thresholds are adjusted annually. The exact figure is confirmed by the ATO in the tax tables and withholding schedules published before the start of each financial year, usually in June.

My employer is not withholding HECS from my pay — what should I do?
Contact your payroll department and confirm that your TFN declaration indicates you have a HELP debt. If withholding still isn't applied, you may need to lodge a withholding variation with the ATO, or set aside funds yourself to cover the repayment at tax time.

Can I claim a tax deduction for my HECS repayments?
No. Compulsory HECS repayments are not tax-deductible. They are a tax liability, not a deductible expense. Voluntary repayments are also not deductible.

What happens to my HECS debt when I die?
HELP debts are cancelled on death. They do not transfer to a deceased estate or to family members. This is one of the key differences between HELP debt and commercial debt.