Tax Planning
Study Loan Reforms: What Individuals and Tax Professionals Should Know This Year
Major changes to student loan repayment – including a 20% debt reduction and higher repayment threshold – are now law. Learn how these affect your tax withholding, repayments, and refund expectations.
By NomadicTax Research Team • 5 min read • May 10, 2026
## What Changed for Study & Training Loans
A range of reforms for study and training loans (e.g., HELP, AASL, VET Student Loans) have now become law in Australia. Key changes include:
- **20% debt reduction** applied to all study and training loans that existed as of **1 June 2025**, with backdating of reductions and recalculation of indexation based on reduced balances.([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/tax-professionals-newsroom/study-and-training-support-loan-changes-are-now-law?utm_source=openai))
- **Compulsory repayment threshold raised** to **$67,000** for the 2025-26 income year. Repayments are now calculated **only** on income above this threshold using a marginal system.([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/tax-professionals-newsroom/study-and-training-support-loan-changes-are-now-law?utm_source=openai))
- Indexation of loans is now tied to the **lower** of CPI or Wage Price Index for affected years. Excess indexation will be credited back.([ato.gov.au](https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/study-and-training-loans-what-s-new?utm_source=openai))
## How This Affects Individuals
- Many taxpayers with loan debts will see **lower compulsory repayments**: for example, someone earning $80,000 previously made repayments on full income, but under new rules pays only on $80,000 - $67,000. That means repayment is significantly smaller.([ato.gov.au](https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/study-and-training-loans-what-s-new?utm_source=openai))
- Employers updating PAYG withholding tables may withhold less tax, especially for those with loans.([ato.gov.au](https://www.ato.gov.au/individuals-and-families/study-and-training-support-loans/study-and-training-loans-what-s-new?utm_source=openai))
- If you have a credit on your loan account after reduction (or have repaid more than recalculated balance) and don't owe taxes or other govt debts, you may get a **refund**. Ensure bank account details are up to date.([ato.gov.au](https://www.ato.gov.au/tax-and-super-professionals/for-tax-professionals/tax-professionals-newsroom/study-and-training-support-loan-changes-are-now-law?utm_source=openai))
## Advice for Tax Professionals
- **Review client loan balances** and assess how much reduction applies as of 1 June 2025.
- Update forecasts on their tax liabilities given new thresholds and repayment rates. Clients may want to vary PAYG rates to avoid over-withholding.
- Verify the indexation calculation on loan balances and ensure any overcharged indexation has been properly re-credited. Document these steps in client files.
## Case Study Example
**Maria**, a nurse with a HELP debt, earning $90,000 in FY2025–26:
- Before reforms: compulsory repayment rate might have been, say, 4% of $90,000 = $3,600 (simplified example).
- After reforms: income above $67,000 = $23,000; repayment rate for that band applies (e.g. 15%) → repayment = $3,450.
- Also, a 20% reduction on Maria’s outstanding debt as of 1 June 2025 lowers the base on which indexation applies.
If Maria had over-paid previously (based on old rates or indexation), she may be eligible for a **refund**, provided she has no outstanding tax debts.
## What You Should Do Now
- If you haven’t already, **check loan statements** and outstanding balance as of 1 June 2025; make sure contact details (bank, address) are current with ATO/loan provider.
- **Adjust PAYG installments** if forecast suggests over-withholding (especially for clients closing in on threshold changes).
- Keep an eye on notices from ATO regarding when changes will reflect in employer withholding schedules.
These reforms aim to ease financial pressure on individuals with study loans and make repayment more equitable. Understanding them ensures there are no surprises when the tax return arrives.