HECS-HELP Repayment 2026-27: Marginal Rates, Thresholds and What You Owe
Since 2025-26, Australia’s compulsory HELP/HECS student loan repayments have shifted to a marginal system — you only pay a percentage on the income above the threshold, not on your entire income. For FY2026-27, the repayment thresholds remain, and the marginal calculation continues to apply. The direct consequence for first-home buyers: a HECS debt reduces your take-home pay, which reduces your borrowing capacity under APRA’s serviceability test — but the new marginal system means the impact is smaller than under the old flat-rate system for most earners.
The 2026-27 HECS-HELP repayment structure:
- Repayment income $0–$69,528: no compulsory repayment
- $69,529–$129,717: 15% of the amount above $69,528
- $129,718–$186,050: $9,028 plus 17% of the amount above $129,717
- $186,051 and above: 10% of total repayment income (this tier reverts to a flat percentage on total income)
Repayment income is your taxable income plus certain add-backs such as reportable fringe benefits, reportable super contributions and net investment losses. It is not just your salary number on a payslip — it can be higher than your taxable income.
Dollar examples: how much you repay at common income levels
For a graduate earning $70,000: your repayment income is $70,000, which falls in the first repayment band. You repay 15% of ($70,000 minus $69,528) = 15% of $472 = $70.80 for the full financial year. Under the old flat-rate system (pre-2025-26), someone at $70,000 would have repaid a percentage of their entire income — roughly $2,100 to $3,500 depending on the rate that year. The marginal system saves this earner over $2,000 per year compared to the old approach.
For a professional earning $100,000: you repay 15% of ($100,000 minus $69,528) = 15% of $30,472 = $4,570.80. That is still substantially less than what a flat-rate system would have charged on $100,000 of total income. The marginal calculation concentrates the repayment on the dollars above the threshold, which is more equitable and leaves more money in your pocket at lower income levels.
For a higher earner at $150,000: the calculation uses the second band. You repay $9,028 plus 17% of ($150,000 minus $129,717) = $9,028 plus 17% of $20,283 = $9,028 plus $3,448 = $12,476. For someone at $200,000: you repay 10% of the entire $200,000 = $20,000 — the top band is a flat rate on total income, which means the marginal benefit ends above $186,050.
How a HECS debt affects your borrowing power
When a lender calculates your borrowing capacity, they look at your after-tax income minus your existing commitments. A compulsory HECS repayment is treated as a non-discretionary outgoing — it reduces the income the lender can count for serviceability. For the $70,000 earner above, the $70.80 annual repayment barely moves the dial on borrowing power. For the $100,000 earner repaying $4,571 per year, the impact is about $380 per month, which could reduce maximum borrowing by roughly $50,000 to $80,000 depending on the lender and other debts.
The practical advice: if you have a HECS debt, do not assume it will stop you from getting a home loan, but do enter your actual after-tax and after-HECS income into a borrowing power calculator before house-hunting. The marginal system is more generous than the old system, but it still reduces serviceable income. Paying off the remaining HECS balance before applying for a mortgage can remove the repayment from the serviceability test entirely, but you need to weigh that against losing deposit savings.
Voluntary repayments: worth it before a mortgage application?
Making a voluntary HECS repayment before 1 June each year avoids indexation on the balance. For borrowers close to paying off the debt and planning a mortgage application in the same year, clearing the remaining HECS balance can improve borrowing power by removing the compulsory repayment line from your serviceability calculation. The trade-off is that every dollar you put into HECS is a dollar not going into your deposit — and in a market where lenders want to see genuine savings, preserving your deposit can matter more than removing a small repayment obligation.
Strategic considerations for first-home buyers with HECS
First, run your borrowing power with and without the HECS repayment to see if the difference is large enough to justify paying it off. Second, check whether your employer is already withholding HECS through PAYG — if they are, the cash flow impact is already built into your take-home pay and lenders will see it on your payslips. Third, if you are close to the $69,528 threshold (for example, working part-time or taking parental leave), you may pay zero compulsory repayment for that year — which means your borrowing power is unaffected.
The interaction between the HECS system and the First Home Super Saver Scheme is also worth noting: if you salary-sacrifice into super under the FHSSS, your taxable income drops, which can lower your repayment income and reduce your HECS repayment — a double win for deposit building, though the FHSSS has its own $15,000 per year and $50,000 lifetime caps.
Information sources
All HECS-HELP repayment thresholds, rates and the marginal calculation method are sourced from the Australian Taxation Office for the 2026-27 financial year. The marginal repayment system was introduced from 2025-26 and continues in 2026-27. Repayment income definitions, indexation rules and voluntary repayment mechanics are also per ATO guidance as at July 2026. Always confirm your own repayment income and current balance through your myGov ATO account before making financial decisions.
Frequently asked questions
Does the marginal system mean I pay less HECS overall?
For most earners, yes — compared to the old flat-rate system. The marginal system charges a percentage only on income above the threshold, whereas the old system charged a percentage on total income once you crossed a threshold. However, your total HECS balance still accrues indexation each year, so paying less per year means the debt may take longer to clear.
What counts as repayment income?
Repayment income includes your taxable income plus reportable fringe benefits, reportable employer super contributions, and certain investment losses added back. It can be higher than the taxable income on your notice of assessment. Check your myGov ATO account for your most recent repayment income figure.
Can I avoid the HECS repayment by salary sacrificing?
Salary-sacrifice super contributions reduce your taxable income, which can lower your repayment income and reduce your compulsory HECS repayment. However, reportable super contributions are added back into repayment income — so the reduction is not as large as the gross salary-sacrifice amount. The interaction is complex; speak with a tax professional.
Should I pay off HECS or save for a deposit?
Pay off HECS if the compulsory repayment significantly reduces your borrowing power and you are close to clearing the balance. Otherwise, preserving your deposit and demonstrating genuine savings history is usually more important for loan approval. Run both scenarios with a mortgage consultant.
Next step: see your actual borrowing power
Your HECS repayment is just one line in a lender’s serviceability calculator. To see how your specific income, debts and HECS balance translate into a maximum loan amount, speak with an Arrivau licensed mortgage consultant — we respond within one business day and can run your numbers across multiple lenders.
General information disclaimer
This article is general information only and is not personal financial, tax, legal or credit advice. HECS-HELP repayment rules, thresholds and indexation rates can change. Arrivau Pty Ltd (ABN 81 643 901 599) provides credit assistance as an ASIC Credit Representative, CRN 530978. Consider your objectives and seek licensed advice before making decisions about HECS repayment strategies or mortgage applications.