HECS-HELP and Salary Packaging: How It Affects Your Repayments and Take-Home Pay

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If you have a HECS-HELP debt and are considering salary packaging, it’s important to understand how the two interact.

With the HECS-HELP repayment threshold increasing from $67,000 to $69,528, many Australians can now earn more before repayments begin. But depending on your income, salary packaging could unexpectedly trigger repayments.

Here’s what you need to know to aim to avoid surprises at tax time.

What is repayment income for HECS-HELP?

Before diving into scenarios, it’s important to understand how HECS-HELP repayments are calculated.

Repayments are based on your repayment income, which includes, but is not limited to:

Taxable income
Reportable super contributions and other adjustments
Reportable fringe benefits (including salary packaging)

This means that while salary packaging could reduce your taxable income, it may still increase your repayment income – which can impact your HECS-HELP repayments.

Scenario A: Below the HECS threshold even after salary packaging

If your repayment income stays below $69,528, even after salary packaging:

You won’t need to make HECS-HELP repayments
You could still benefit from reduced taxable income
Your take-home pay may increase

Best outcome: You could maximise your salary packaging benefits without triggering student loan repayments.

Scenario B: Near the HECS-HELP repayment threshold

If your income is close to the threshold, salary packaging can have a different effect:

You may cross the $69,528 repayment income threshold
HECS-HELP repayments may start to apply

While you may still achieve a net financial benefit, you could also face unexpected repayments if you’re not planning ahead.

Scenario C: Well above the HECS-HELP repayment threshold

If your income is already above the $69,528 repayment income threshold:

You are already making HECS-HELP repayments
Salary packaging does not change whether you repay
It may change how much you repay

In most cases, you may still come out financially ahead despite higher repayments, thanks to potential tax savings from salary packaging.

How to prevent a HECS-HELP shortfall

To help stay in control of your finances:

Use a salary packaging or HECS calculator to estimate your repayments
Monitor your repayment income across the year
Ask your payroll team to adjust your HECS withholding

How salary packaging can help pay off HECS-HELP faster

A lesser-known benefit of salary packaging is that it may help you pay off your HECS-HELP debt sooner. Your HECS repayment is calculated based on your repayment income. Depending on the structure, salary packaging may increase or maintain your repayment income while at the same time, potentially reducing your taxable income.

Avoiding HECS-HELP tax-time surprises

A common factor to be aware of with HECS-HELP and salary packaging is an unexpected tax bill.

Why it happens

Employers may not withhold enough for HECS repayments
Salary packaging may increase your repayment income

Withholding is not automatically recalculated based on your new salary packaging arrangement. This mismatch is what can lead to unexpected tax bills.

See how much you could save and estimate any additional HECS-HELP repayments.

_{Things you need to know: This general information doesn't take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax and financial advice. Conditions and fees apply, along with credit assessment criteria for lease and loan products. The availability of benefits is subject to your employer’s approval. Maxxia may pay and/or receive commissions in connection with its services.}