How does HECS work
If you have a HECS debt your employer will withhold additional tax from your wage (assuming you answered YES to the question "Do you have a HECS debt" when you completed the Tax File Number declaration)
When we prepare your individual tax return we take into account
- whether your income has exceeded the HECS repayment threshold ($51,550 for the 2023-24 tax year) (https://www.ato.gov.au/tax-rates-and-codes/study-and-training-support-loans-rates-and-repayment-thresholds)
- how much tax was withheld from your annual wages
If your taxable income is below the HECS repayment threshold you get the extra tax withheld back
If your taxable income is above the HECS repayment threshold the extra tax that was withheld* is taken from your income tax account and transferred to your HECS account – hence why you only see repayments being made to your HECS debt once per year i.e. when you lodge your tax return
* Even if extra tax was not withheld the ATO still transfers $ from your income tax account to your HECS account – you then pay the income tax account debt
Once you stop studying and the HECS debt if fully repaid you’ll need to let your employer know so they stop withholding the extra tax
Your HECS debt increases by the CPI on 1 June each year so if you are looking to make a voluntary payment consider paying it before then
If you are in serious hardship or have another special reason eg natural disaster you can apply to the ATO to have your HECS debt repayment deferred or reduced