HECS-HELP Repayment 2026-27: How the Marginal Rate System Works and What It Costs Your Borrowing Power
From the 2025-26 financial year, Australia switched HECS-HELP repayments from a flat percentage of total income to a marginal rate system. In 2026-27, you pay nothing on your first $69,528 of repayment income, then 15 cents per dollar on the next portion, 17 cents on the portion above $129,717, and 10% of everything once you cross $186,051. This means most graduates pay less than under the old system — but the effect on mortgage borrowing power is larger than the repayment amounts suggest because lenders assess HELP obligations as a permanent liability.
The 2026-27 HECS-HELP Marginal Rate System: Complete Brackets
Repayment income is your taxable income plus certain supplementary amounts — reportable fringe benefits, reportable super contributions, and net investment losses. Here are the 2026-27 brackets:
$0 to $69,528: No repayment. Zero compulsory repayment obligation regardless of your HELP debt balance. Indexation (2.8% applied 1 June 2026) still applies to your outstanding debt even when you are not making repayments.
$69,529 to $129,717: 15 cents for each dollar above $69,528. At $100,000 repayment income, your obligation is 15% × ($100,000 − $69,528) = 15% × $30,472 = $4,571. At the top of this band ($129,717), the repayment is $9,028.
$129,718 to $186,050: $9,028 plus 17 cents for each dollar above $129,717. At $150,000, your repayment is $9,028 + 17% × ($150,000 − $129,717) = $9,028 + $3,448 = $12,476. At the top of this band ($186,050), it reaches $18,605.
$186,051 and above: 10% of total repayment income — not marginal, a flat percentage of everything. At $200,000, the repayment is $20,000. At $250,000, it is $25,000.
The critical difference from the old system: under the previous flat-rate model, if you earned $70,000, you paid approximately 4% of your total income — $2,800. Under the marginal system, you pay 15% × ($70,000 − $69,528) = $71. This is a saving of over $2,700 for someone just above the old threshold.
How Much You Actually Repay: Six Income Levels Compared
The amounts below assume repayment income equals taxable income with no supplementary items. Use the ozloan.net income tax calculator to compute your exact tax and HELP obligation together.
$60,000 Repayment Income
Repayment: $0. You are below the $69,528 threshold. Indexation of 2.8% on your debt balance still applies. At a $30,000 HELP debt, that is $840 added to your balance on 1 June 2026.
$80,000 Repayment Income
Repayment: 15% × ($80,000 − $69,528) = 15% × $10,472 = $1,571. This is approximately $131 per month deducted through PAYG withholding or assessed at tax time.
$100,000 Repayment Income
Repayment: 15% × ($100,000 − $69,528) = 15% × $30,472 = $4,571. Approximately $381 per month. At this level, the repayment is enough to outpace 2.8% indexation on a HELP debt up to roughly $163,000 — meaning your balance actually decreases year-on-year if your debt is below this amount.
$130,000 Repayment Income
Repayment: 15% × ($130,000 − $69,528) = 15% × $60,472 = $9,071. This is in the 15% marginal band, just above the $129,717 threshold. The repayments accelerate significantly in dollar terms because the marginal amount is large, but the rate is still 15%.
$150,000 Repayment Income
Repayment: $9,028 + 17% × ($150,000 − $129,717) = $9,028 + 17% × $20,283 = $9,028 + $3,448 = $12,476. The marginal rate jumps from 15% to 17% at $129,718. Your effective rate on total income at $150,000 is 8.3%.
$200,000 Repayment Income
Repayment: 10% × $200,000 = $20,000. You are in the flat 10% band. At this income, your HELP debt will be cleared quickly — a $50,000 balance would be repaid in under three years if income stays at this level, assuming indexation partially offsets each year.
Why HECS-HELP Matters for Mortgage Applications
Lenders do not treat HELP debt the same way they treat a credit card or car loan. HELP is not a debt with monthly minimum payments — it is a tax obligation that scales with your income. But lenders still factor it into your serviceability assessment because the repayments reduce your after-tax income.
Here is how a typical major bank assesses HELP:
- The HELP repayment is treated as an ongoing liability deducted from your net income
- The repayment amount is calculated based on your current income using ATO brackets
- It is applied even if your HELP balance is small — the repayment obligation exists regardless of the outstanding amount
- The deduction is considered permanent because HELP debt takes years to clear at typical graduate incomes
Impact on borrowing capacity at a 9.5% assessment rate:
- $80,000 income, $1,571 HELP repayment ($131/month): reduces borrowing capacity by approximately $13,000 to $15,000
- $100,000 income, $4,571 HELP repayment ($381/month): reduces borrowing capacity by approximately $38,000 to $42,000
- $130,000 income, $9,071 HELP repayment ($756/month): reduces borrowing capacity by approximately $76,000 to $82,000
- $150,000 income, $12,476 HELP repayment ($1,040/month): reduces borrowing capacity by approximately $105,000 to $115,000
These figures assume a single applicant with no other debts. The actual reduction varies by lender — some use the exact ATO repayment formula, others apply a flat percentage estimate. A broker familiar with lender HELP policies can identify which lenders assess HELP most favourably for your income bracket. See our APRA buffer analysis for how the 3% buffer interacts with these deductions.
Should You Voluntarily Pay Off Your HELP Debt Before Applying for a Mortgage?
This is the most common question from graduates approaching their first home purchase. The answer depends on three factors: your remaining HELP balance, your income level, and how close you are to your maximum borrowing capacity.
If your HELP balance is small (under $15,000) and you are within $30,000 of your target borrowing amount: making a voluntary repayment to clear the balance can eliminate the repayment obligation from your serviceability assessment entirely. For someone earning $100,000, clearing a $10,000 HELP debt could add approximately $40,000 in borrowing capacity — a strong return on that $10,000.
If your HELP balance is large (over $40,000) and you are at a moderate income: voluntary repayment is rarely the right financial move. HELP debt carries no real interest — only indexation to CPI (2.8% in 2026). Paying it off with cash that could otherwise form part of your deposit reduces your loan-to-value ratio (LVR) and may push you into a higher LVR band with higher interest rates or LMI costs. The deposit is almost always more valuable than eliminating the HELP repayment from your serviceability calculation.
If you are a high-income earner ($150,000+) with a moderate HELP balance: your repayments are already substantial ($12,476/year at $150,000). The debt will self-clear within a few years. Voluntary repayment changes the timeline but not the total cost significantly. Focus on maximising your deposit and choosing a lender that calculates HELP repayments based on marginal brackets accurately rather than using a conservative flat-rate estimate.
The 2025-26 System Change: Why the Switch to Marginal Rates?
Before 2025-26, HELP repayments were calculated as a percentage of your total repayment income. If you crossed a threshold — say, $70,000 — you paid a flat percentage (e.g., 4%) on your entire income, not just the excess. This created a "cliff edge" where earning one extra dollar could trigger hundreds of dollars in additional repayments.
The marginal system, introduced from 2025-26 and continuing for 2026-27, abolished that cliff. You now pay only on the income above each threshold, with a progression from 0% to 15% to 17% to 10%. The 10% band at the top functions as a flat rate on total income — a design choice reflecting that high-income earners can clear their debt quickly.
The reform was estimated to reduce HELP repayments for approximately 900,000 graduates, with the largest savings concentrated in the $70,000 to $100,000 income range — exactly where many first home buyers sit. For a complete picture of your net income after tax and HELP, use our income tax calculator which includes the HELP repayment module.
Indexation: The Silent Cost of HELP Debt
HELP debt is indexed to inflation each year on 1 June. The 2026 indexation rate was 2.8%, applied to the balance before any repayments are credited. Indexation is not interest — it simply maintains the real value of the debt — but it can feel like interest when your repayments are small.
The indexation rate for 2027 will be determined by the March 2027 CPI figure and applied on 1 June 2027. With inflation moderating, future indexation rates are expected to be lower than the 7.1% applied in 2023.
Here is what indexation looks like in practice: a $50,000 HELP debt indexed at 2.8% adds $1,400 to the balance. If you earn $80,000 and repay $1,571 through the compulsory system, your balance net change is +$1,400 (indexation) − $1,571 (repayment) = −$171. Your debt is slowly shrinking. If you earn $70,000 and repay only $71, your balance grows by +$1,400 − $71 = +$1,329. You are going backwards in nominal terms, though not in real terms.
This is why many graduates in the $70,000 to $80,000 range feel like their HELP balance is not moving — because the compulsory repayment barely covers indexation.
Data Sources
All repayment thresholds and rates are sourced from the Australian Taxation Office's 2026-27 HELP repayment income thresholds and rates, published following the annual indexation of repayment thresholds in accordance with the Higher Education Support Act 2003. The marginal rate system was introduced by the Universities Accord (Student Support and Other Measures) Act 2024 and took effect from 1 July 2025.
Indexation rates are from the ATO's published CPI indexation factors for HELP debts. Borrowing power estimates are based on standard lender serviceability models using a 9.5% assessment rate (6.5% loan rate plus 3% APRA buffer) and a 30-year loan term. Actual lender assessments vary.
This article reflects rates as at July 2026. Repayment thresholds are indexed annually and will change for 2027-28. Verify current thresholds with the ATO or our calculator before making financial decisions.
FAQ
Do I still pay HELP if I move overseas? Yes. Since 2017, Australian graduates living overseas with HELP debt are required to make compulsory repayments based on their worldwide income. The thresholds and rates are the same as for residents. You must lodge an overseas income return or non-lodgment advice each year. Non-compliance can result in penalties and interest charges.
What happens when my HELP balance drops below the minimum repayment amount? Your compulsory repayment will be capped at the remaining balance. If you owe $500 and your calculated repayment is $4,571, you only pay $500 and the debt is cleared. Your employer may still withhold the full PAYG HELP amount during the year — the excess is refunded when you lodge your tax return.
Does voluntary repayment reduce the compulsory repayment obligation in the same year? No. Voluntary repayments made during the year do not reduce the compulsory repayment calculated at tax time. If you make a $5,000 voluntary payment in January and your compulsory assessment in July comes to $4,571, you will pay both — a total of $9,571 for that year. The voluntary repayment has no offsetting effect on the compulsory amount. The only exception is if your voluntary repayment clears the balance entirely before the compulsory assessment.
Can I salary sacrifice to reduce my HELP repayment income? Partially. HELP repayment income includes reportable super contributions above the compulsory super guarantee amount. If you salary sacrifice into super, the sacrificed amount reduces your taxable income but is added back as a reportable contribution for HELP purposes. Net investment losses are also added back. The calculation is designed to prevent HELP repayment avoidance through salary packaging. However, deductions for work-related expenses do reduce repayment income because they are not "supplementary" items added back.
If I have a HELP debt on 1 June but repay it in full by December, do I still pay indexation? Indexation is applied on 1 June each year to the balance outstanding on that date. If you repay the debt in full after 1 June, the indexed amount is part of what you repay. If you repay before 1 June, no indexation applies because the balance is zero on the indexation date. This is why high-income earners sometimes time large voluntary repayments for late May — to minimise the indexed amount.
Does a HELP debt affect my credit score? No. HELP debt does not appear on your credit report and does not affect your credit score. It is not reported to credit bureaus and is not considered a consumer debt. However, it does affect your borrowing capacity with mortgage lenders, as detailed above.
This is general information only, not financial, tax, or legal advice. HELP repayment thresholds, rates, and indexation factors are subject to annual adjustment by the ATO. Consult the ATO or a registered tax agent for advice on your specific circumstances. For questions about how HELP debt affects your home loan application, contact an Arrivau licensed finance advisor — expect a response within one business day.