Understanding the Government’s New 20% HECS–HELP Debt Reduction

If you currently have a HECS–HELP or other study and training loan, there’s some genuinely welcome news. The Australian Government has passed legislation to reduce student loan balances by 20%, with the change flowing automatically to millions of Australians over the coming weeks.

The ATO has already begun notifying taxpayers, with the first 100,000 people receiving text messages confirming their reduced balances. Another 3 million Australians will receive the same notification over the next two weeks, with a total of $16 billion in study debt expected to be wiped.

For most of our clients, no action is required — but there are a few important points to be aware of, especially if you may be eligible for a refund.

What’s Changing?

The Government will backdate the 20% reduction to the balance of your study loan as at 1 June 2025. This means:

• The reduction will be applied directly to your study or training support loan account.
• It applies to most study loan types, including HECS–HELP, FEE-HELP, VET Student Loans, and others.
• Most loan accounts will show the credit by the end of December 2025, although some may take longer if further checks are required.

Could You Receive a Refund?

Yes — and many taxpayers will.

If, after the 20% reduction is applied, your study loan account goes into credit, that credit may result in a refund.

Refunds may also arise if:

• Your loan balance drops below the amount you have already repaid since 1 June 2025, or
• Your compulsory repayment is reduced and an amended assessment is issued.

Before issuing a refund, the ATO will first apply any credits against other outstanding tax or Commonwealth debts (if applicable). Once that is done:

• If the credit relates to a reduced compulsory repayment, the ATO will issue an amended notice of assessment before refunding.
• All other refunds will be sent directly to the bank account you have nominated with the ATO.

What Do You Need to Do?

While the reduction applies automatically, there is one important step you can take now:

1. Check your nominated bank account details with the ATO

Refunds will only be sent to the bank account recorded for you. Ensuring your details are up to date will help avoid delays.

If you need help confirming or updating these details, our team is here to assist.

2. Keep an eye on ATO notifications

You may receive:

• A text message confirming your reduced balance
• An amended assessment (if your compulsory repayment amount changes)

We recommend reading these carefully and contacting us if anything looks unclear.

What Happens Next?

Most reductions will appear in loan accounts by December 2025, and refunds will follow once assessments and credits are processed. Some cases may take longer where further ATO review is needed.

If you’re unsure whether you’re eligible for a refund, or want to understand what this means for your tax position this year, please reach out. This is a rare opportunity to enjoy a meaningful reduction in study debt — and we’re here to ensure it’s processed smoothly and correctly.