Broker guide
HECS Repayment Changes: Home Loan Assessment 2026
Has a HECS repayment change altered your client’s borrowing position? Check debt repayments and current lender treatment before a home loan assessment.
- Published
- Updated
Yes, a HECS debt affects a home loan assessment, because most lenders count the compulsory repayment as a commitment that reduces the income available for the loan. The client’s income sets the repayment rather than the balance, and the repayment fell from 1 July 2025 when the ATO moved to a marginal repayment system. Some lenders now leave the repayment out when the debt is small or close to repaid.
That makes two separate checks for any reassessment. Work out the client’s repayment under the 2026–27 rates. Then find whether the lender you’re considering counts that repayment, counts it at a different assessment rate or leaves it out.
The ATO, ASIC and the Australian Prudential Regulation Authority (APRA) call this debt a Higher Education Loan Program (HELP) debt. HECS-HELP is the most common type, so this guide uses “HECS debt” throughout.
What Changed
Two sets of changes affect a HECS debt in a home loan assessment, and they started on different dates. The ATO changed how much a client repays. Regulators and lenders changed whether that repayment counts.
Repayment Changes From the ATO
| Date | Change | What it means for the assessment |
|---|---|---|
| 1 June 2025 | Debts that existed on this date were cut by 20%, with the ATO processing the reductions from late 2025 | A balance quoted before the reduction overstates the debt |
| 1 July 2025 | Compulsory repayments moved to marginal rates from the 2025–26 income year, with no repayment at or below $67,000 | The repayment is now 15c for each $1 above the threshold instead of a percentage of total income |
| 24 September 2025 | Employers began withholding under the updated payroll formulas | Payslips before this date show the old, higher withholding |
| 1 June 2026 | Indexation of 2.8% applied to debt unpaid for more than 11 months | The balance rose slightly, without changing the repayment |
| 1 July 2026 | The 2026–27 minimum threshold rose to $69,528, and new payroll formulas apply | Current payslips and repayment estimates use this threshold |
The ATO’s repayment thresholds and rates page, last updated 30 June 2026, sets out both years. In 2026–27, the repayment is 15c for each $1 from $69,528 to $129,717, then $9,028 plus 17c for each $1 above $129,717 up to $186,050. A client with repayment income above $186,050 repays 10% of their total repayment income.
Lender-Policy Changes
| Date | Change | What it means for the assessment |
|---|---|---|
| 6 March 2025 | ASIC added RG 209.68 and RG 209.69 to its responsible lending guide | Any credit licensee can consider a HECS debt differently from other debts |
| 9 April 2025 | CommBank began excluding HECS repayments where the debt can be repaid within 12 months | A time-to-repay test at one of the four major banks |
| 19 June 2025 | APRA finalised its guidance for banks and other authorised deposit-taking institutions | A bank can leave the repayment out by exception, with 12 months as APRA’s reference point |
| 31 July 2025 | NAB stopped counting HECS debt of $20,000 or less | A balance test, separate from the time-to-repay test |
| 30 September 2025 | APRA’s debt-to-income (DTI) reporting definition began excluding all HECS debt | The balance no longer adds to a bank’s DTI measure |
| 1 February 2026 | APRA limited loans at six or more times income to 20% of each bank’s new lending | HECS debt stays outside the DTI figure the limit uses |
ASIC’s Regulatory Guide 209 sets the responsible lending expectations for every credit licensee. It says a lender may leave a HECS debt out of a client’s outgoings. It can do so after weighing the remaining debt, the expected repayment period and the proposed loan term.
APRA’s 19 June 2025 response keeps inclusion as the baseline for banks. A bank that leaves out a HECS debt expected to take longer than 12 months to repay must report that loan as an exception. Because the debt-to-income ratio definition now excludes HECS debt, the balance doesn’t count toward APRA’s DTI limit.
A tax change doesn’t reach every lender’s calculator on the same day. The ATO rates changed on 1 July 2025, while each lender’s policy has its own date. Record both before you rely on a borrowing figure.
Calculate the Relevant Commitment
The commitment a lender counts is the annual compulsory repayment, worked out from the client’s repayment income. The outstanding balance doesn’t set the repayment. It decides how long the repayments last and whether a lender’s exclusion applies.
Repayment income is more than salary. The ATO adds taxable income, reportable fringe benefits, total net investment losses, reportable super contributions and exempt foreign employment income. Salary-sacrificed super and a negatively geared property can push a client’s repayment above what their salary alone suggests.
Balance Versus Repayment: A Fictional Example
This fictional example shows how the repayment input is built, without giving tax or credit advice. Mia earns a $95,000 salary in 2026–27 with no other repayment income, and her ATO account shows a HECS balance of $14,000.
| Income year | Rule | Mia’s compulsory repayment | Monthly equivalent |
|---|---|---|---|
| 2024–25 | 5.5% of total repayment income in the $94,504 to $100,174 band | $5,225.00 | $435.42 |
| 2025–26 | 15c for each $1 above $67,000 | $4,200.00 | $350.00 |
| 2026–27 | 15c for each $1 above $69,528 | $3,820.80 | $318.40 |
The 2026–27 figure is $95,000 less $69,528, which is $25,472, multiplied by 15%. A lender that counts the debt uses $318.40 a month. An assessment built on Mia’s 2024–25 notice of assessment would overstate it by about $117 a month.
Here’s the common mistake beside the correct method.
- Incorrect: treating the $14,000 balance like a personal loan and applying a repayment rate to the balance.
- Correct: applying the ATO’s 2026–27 rates to Mia’s repayment income, which gives $318.40 a month whatever the balance.
The balance matters for the time-to-repay test. At $3,820.80 a year, Mia’s $14,000 takes more than three years to repay through compulsory repayments. A client with a $3,000 balance on the same income would clear it within the 2026–27 income year.
Why a Small Repayment Moves the Borrowing Figure
A HECS repayment comes out of gross income without reducing tax, so it lowers the client’s after-tax income by the same amount. In a fictional calculation at a 9% assessment rate over 30 years, $318.40 a month would service about $39,600 of loan. That figure shows the scale of the input, not any lender’s result.
The payslip shows a different number from the annual calculation. Employers withhold the HECS component from each pay using the ATO’s weekly formulas, including on bonuses and commissions. The ATO then sets the actual compulsory repayment on the notice of assessment.
Compare Lender Treatment
With income, living expenses and other debts held constant, the lender’s HECS policy decides which repayment figure enters the assessment. Mia’s file shows four possible treatments. The loan serviceability guide covers the other inputs, including buffers and expense benchmarks.
| Treatment | HECS commitment counted for Mia | Assessment rate on the new loan | Policy example |
|---|---|---|---|
| Count the repayment | $318.40 a month | The lender’s standard rate | Standard practice where the debt won’t be repaid soon |
| Leave it out because it will be repaid soon | $0 | The lender’s standard rate | CommBank, where the debt can be repaid within 12 months |
| Leave it out because the balance is small | $0 | The lender’s standard rate | NAB, where the debt is $20,000 or less |
| Count it with a smaller buffer | $318.40 a month | 1% above the loan rate | CommBank, where the debt can be repaid within one to five years |
Mia’s $14,000 balance and three-plus years to repay put her in different rows at different lenders. A lender with no exclusion counts $318.40 a month. NAB’s balance test removes it, and CommBank’s one-to-five-year rule keeps it but lowers the assessment rate on the whole loan.
CommBank’s near-term test needs a balance the compulsory repayments will clear within 12 months. A client with $3,000 left on Mia’s income meets it, but Mia’s $14,000 needs more than three years. A voluntary repayment can bring a balance under a lender’s limit, but it uses cash the client might need for the deposit and purchase costs.
CommBank’s October 2025 newsroom article describes both of its options. NAB’s $20,000 rule, effective 31 July 2025, was reported by The Adviser on 24 July 2025. Both rules apply only to clients who meet each lender’s other eligibility conditions.
Lenders outside these examples keep their own rules, and a lender can change its rule or limit it by product. Non-bank lenders aren’t covered by APRA’s guidance, though ASIC’s guide applies to them. Check each shortlisted lender’s current HECS policy, then check its calculator uses the 2026–27 rates.
File Evidence
Record four items for every HECS assessment: the source date, the payroll deduction, the current balance and the lender calculator assumption. Together they show which rules applied when the borrowing figure was set. They also let a reviewer recheck the file when the ATO or a lender changes a rule.
| Item | Where it comes from | What to record |
|---|---|---|
| Source date | The ATO thresholds page and the lender’s policy | The income year used, the page’s update date and the lender policy date |
| Payroll deduction | The client’s latest payslip | The HECS withholding shown, the pay date and the year-to-date figure |
| Current balance | The ATO app, ATO online services or an ATO statement | The balance, the date it was viewed and whether it reflects the 20% reduction |
| Calculator assumption | The lender’s serviceability calculator | Whether the repayment was counted, excluded or assessed with a smaller buffer, and the dollar figure entered |
Reconcile the payslip with the ATO balance before you rely on either. The ATO doesn’t credit payroll withholding to the loan account each pay. It applies the amount as a lump sum after the client lodges a tax return and the compulsory repayment is calculated.
A client whose 2026–27 withholding will clear most of the debt still shows the full balance until that year’s tax return is assessed. Explain the gap in the file note, using the year-to-date withholding and the expected compulsory repayment. A payslip dated before 24 September 2025 or a notice of assessment for 2024–25 shows the old method and doesn’t support a current repayment figure.
Record the lender’s policy wording beside the calculator output. Bulma’s Policy Advisor answers a HECS question across 52+ lenders and quotes the policy wording behind each answer, with the date Bulma last updated that policy. You can copy that answer with its source into the file notes, then record the figure the lender’s calculator used.
When the file shows Mia’s $318.40 commitment, the balance date and the policy each lender applied, the borrowing figures are comparable. That record shows why one lender counted the repayment and another didn’t, which helps you explain the lender choice in the client’s credit proposal.
