The federal Labor government is set to introduce legislation today that will see a significant 20 per cent cut to the HECS-HELP debt of more than three million Australians.
Prime Minister Anthony Albanese confirmed the move in a social media video this morning, calling it a “game-changing” measure aimed at easing cost-of-living pressures.
“We said it would be the first thing we do, and today we’re making it happen,” Albanese said. “No forms, no applications – just real help with your student debt.”
The legislation, if passed, will see the Australian Taxation Office (ATO) automatically apply the 20 per cent reduction to outstanding student debt as of June 1, 2025. Indexation applied to the debt will also be retrospectively adjusted.
Key changes and impacts:
- Average student loan balance to be reduced by approximately $5500.
- Automatic process: no action required by debt holders.
- Repayments made during the year will count toward the reduced balance.
- Overpaid amounts will be refunded after tax returns are lodged.
Another proposed change includes increasing the income threshold for compulsory HECS repayments from $54,435 to $67,000, effective July 1, 2025. This means lower-earning Australians will not need to make repayments unless they choose to contribute voluntarily.
“This will take a weight off young Australians trying to move out or save for a mortgage,” Education Minister Jason Clare said.
The proposed legislation only needs the support of the Greens to pass the Senate, though some Coalition MPs are also considering support.
CPA Australia’s Gavan Ord warned Australians not to delay lodging their tax returns in hopes of maximizing benefits. “Don’t follow social media finfluencers – the ATO will handle everything automatically,” he said.
Taxpayers whose HECS debt is fully repaid will need to notify their employer by submitting a withholding declaration form, ensuring the HECS-related tax deduction is stopped from their pay.
