HECS Repayment Explained: 2025-26 Marginal Rates (Australia)

From 1 July 2025, compulsory HECS-HELP repayments stopped being a flat slice of your whole income. You now only repay on the dollars above a $67,000 threshold. That sounds small. For most salaried borrowers it is hundreds of dollars a year - and it changes the monthly expense lenders put against your borrowing capacity. This article works the numbers using the HECS repayment calculator.

The 30-second summary

• Compulsory repayments now use a marginal system: 15% of income above $67,000, then $8,700 + 17% above $125,000, then 10% of total income above $179,285.
• On a $90,000 salary the compulsory repayment is $3,450/year (~$287.50/month) - about $600 less than the old flat-rate system.
• Lenders care about that monthly cash-flow, not your HELP balance. Expect roughly $40k-$70k less borrowing capacity at this income.
• A one-off 20% balance reduction applied from 1 June 2025 - your myGov balance should already show it.
• Thresholds index every year. This article uses the 2025-26 ATO table.

How the new bands work

Repayment income	Compulsory repayment
$0 - $67,000	Nil
$67,001 - $125,000	15% of income above $67,000
$125,001 - $179,285	$8,700 + 17% of income above $125,000
$179,286+	10% of total repayment income

The ATO's own worked example: Grace earns $80,000. Old system: 3.5% of $80,000 = $2,800. New system: 15% of ($80,000 − $67,000) = $1,950.

Worked example - $90,000 income, $40,000 HELP balance

Item	Figure
Repayment income	$90,000
Outstanding HELP balance	$40,000
Income above $67,000	$23,000
Compulsory repayment	$3,450
Monthly equivalent	$287.50
Effective rate of total income	3.83%
Balance after this year	$36,550
Years to clear (flat income, no indexation)	~10.6

Plug the same inputs into the HECS repayment calculator to confirm - these figures come from the engine, not hand arithmetic.

How this hits borrowing capacity

Australian lenders assess serviceability off your income minus living expenses (HEM) minus existing commitments. The annual HECS compulsory repayment is one of those commitments, usually converted to a monthly figure.

At $287.50/month on a $90k salary, the same repayment that barely moves your take-home pay can still knock tens of thousands off the loan a bank will approve. Run your numbers in the borrowing capacity calculator with HECS in other commitments, and see take-home pay after tax in the income tax calculator.

For the broader borrowing picture - APRA buffer, joint applications, credit-card limits - see How much can I borrow in Australia?.

FAQ

How is HECS repaid under the 2025-26 marginal system?

Compulsory HELP repayments are calculated only on income above the $67,000 threshold. Between $67,001 and $125,000 you pay 15c per dollar above $67,000. Between $125,001 and $179,285 you pay $8,700 plus 17c per dollar above $125,000. At $179,286 and above you pay 10% of your total repayment income.

How much HECS do I repay on a $90,000 salary?

($90,000 − $67,000) × 15% = $3,450 for 2025-26, or about $287.50 per month. That is the figure most lenders count as an expense for borrowing capacity.

Does HECS affect my borrowing capacity?

Yes. Lenders treat the annual compulsory repayment as an ongoing expense. On a $90,000 salary the ~$3,450/year repayment typically reduces capacity by roughly $40,000-$70,000 depending on the lender. The HELP balance itself does not matter - only the repayment does.

What changed from the old HECS system?

Before 2025-26, repayments were a flat percentage of your entire repayment income. Under the marginal system an $80,000 income owes $1,950 instead of the old $2,800. Most people pay less; people at or above $179,286 still pay 10% of total income.

What is repayment income?

Taxable income plus reportable fringe benefits, net investment losses, reportable super contributions, and exempt foreign employment income. Salary-only earners can start with taxable income.

Should I make voluntary HECS repayments?

Only if the after-tax return elsewhere is worse than cutting future indexation on the HELP balance. Voluntary repayments are not tax-deductible. Compare against your home loan rate and emergency-fund needs first.

Next step

Run your own income and balance through the HECS repayment calculator, then fold the monthly figure into borrowing capacity if you are shopping for a home loan.