The Australian Taxation Office does not calculate your compulsory HELP repayment on your taxable income. It calculates it on your repayment income, which is taxable income plus four things you have already sacrificed away: reportable employer superannuation contributions, reportable fringe benefits, total net investment losses and exempt foreign employment income.
Sacrificing $10,000 into super will cut your income tax. It will not cut your compulsory repayment by a cent, because the $10,000 is added straight back.
A novated car lease is worse than neutral. It can push your repayment income above where it started, raise your compulsory repayment, and leave you with a tax bill because your employer has been withholding on the reduced salary figure all year.
This is general information for students and recent graduates in Australia, not personal financial advice.
Repayment income at a glance
| Item | Detail |
| Repayment income | Taxable income plus the four add-backs below |
| Add-back 1 | Total net investment loss, financial and rental |
| Add-back 2 | Reportable fringe benefits amount |
| Add-back 3 | Exempt foreign employment income |
| Add-back 4 | Reportable super contributions, employer and deductible personal |
| 2025-26 | Nil to $67,000, then 15c per $1 over $67,000 |
| 2025-26 second tier | $8,700 plus 17c per $1 over $125,000 |
| 2026-27 | Nil to $69,528, then 15c per $1 over $69,528 |
| 2026-27 second tier | $9,028 plus 17c per $1 over $129,717 |
| RFBA reporting trigger | Fringe benefits with taxable value over $2,000 in an FBT year |
| Gross-up rate for RFBA | 1.8868, the lower rate |
All figures from the ATO income tests page and the ATO study and training support loans rates and thresholds page.
The exact ATO definition, component by component
The ATO's income tests page sets out five components. Taxable income is the base: assessable income less deductions, excluding any First Home Super Saver amounts released to you.
Then the add-backs. Total net investment loss covers net financial investment loss and net rental property loss, so a negatively geared property does not shrink your HELP repayment. Reportable fringe benefits is whatever figure appears on your income statement. Exempt foreign employment income is income exempt under specific provisions, less related expenses. Reportable super contributions covers employer contributions above the compulsory rate and personal contributions you claim a deduction for.
The same definition applies to HELP, VET Student Loans, SSL, ABSTUDY SSL, AASL and SFSS. There is no friendlier test for one of them.
The marginal model: only the income above the threshold counts
Crossing the threshold by one dollar does not trigger a repayment on your entire income. For 2025-26 the first $67,000 of repayment income attracts nothing. Above that you pay 15c on each dollar over $67,000, up to $125,000. From $125,001 you pay $8,700 plus 17c on each dollar over $125,000. Above $179,285 the rate becomes a flat 10 per cent of total repayment income.
For 2026-27 the same shape applies at indexed figures: nil to $69,528, then 15c per $1 over $69,528 up to $129,717, then $9,028 plus 17c per $1 over $129,717, then 10 per cent of total repayment income above $186,050.
Worked example one: $10,000 into super
Take a graduate earning $85,000 in 2025-26 with a HELP debt, who arranges to salary sacrifice $10,000 into super.
Taxable income falls from $85,000 to $75,000, and that saving is real. At a 30 per cent marginal rate plus the 2 per cent Medicare levy, $10,000 moved out of salary saves roughly $3,200, against $1,500 of contributions tax inside the fund. Call it about $1,700 ahead, before fees and before the money being locked away until preservation age.
Now the HELP side. The $10,000 is a reportable employer superannuation contribution, so it is added back. Repayment income stays at $85,000. The compulsory repayment is 15 per cent of $18,000, which is $2,700, exactly the same as it would have been with no sacrifice at all.
The problem is withholding. The employer is now paying $75,000 in salary and withholding the loan component against that figure, which is in the order of 15 per cent of $8,000, or about $1,200 across the year. The assessment says $2,700. The gap of roughly $1,500 arrives as a bill when the return is lodged.
The sacrifice was still worth doing. It just needs to be funded, and the person doing it needs to know that a four figure amount is coming in about October.
Worked example two: the novated lease that raises the bill
Same graduate, now on $95,000, takes a novated lease on a $40,000 petrol car. Under the statutory formula the taxable value of the car benefit is 20 per cent of the base value, so $8,000, assuming no employee contributions. Because that is well over the $2,000 trigger, the employer reports it, grossed up at 1.8868. The reportable fringe benefits amount is about $15,094.
Pre-tax lease payments of $12,000 pull taxable income down to $83,000. Add back the $15,094 and repayment income is $98,094. That is $3,094 higher than the $95,000 they started on.
Before the lease, the compulsory repayment was 15 per cent of $28,000, or $4,200. After the lease it is 15 per cent of $31,094, or about $4,664. The lease has increased the compulsory repayment by around $464.
Then the withholding gap. The employer is withholding against $83,000 of salary, roughly $2,400 of loan component for the year. The assessment is about $4,664. The shortfall is in the order of $2,264, on top of the higher repayment itself.
The gross-up is the part people miss. The reportable amount is not what the car cost you. It is the pre-tax salary a top rate taxpayer would have needed to buy the same benefit, which is why $8,000 of taxable value lands as just over $15,000 on your income statement.
An electric vehicle does not solve it. Private use of an eligible electric car can be exempt from FBT, but the ATO is explicit that it is still a reportable fringe benefit, with a notional taxable value worked out and reported.
When salary sacrifice still makes sense
Super sacrifice still wins on tax. Concessional contributions are taxed at 15 per cent inside the fund against a marginal rate that is usually 30 or 32 per cent including Medicare levy for someone in this income band. The HELP repayment is unchanged rather than increased, so the tax saving is a genuine saving. The cost is liquidity, which matters enormously if you are still paying rent in advance or building a bond.
An employee contribution method on a novated lease changes the picture. Contributing after tax money towards the running costs reduces the taxable value of the car benefit, and a taxable value reduced to nil produces no reportable amount at all. Whether that leaves you better off overall is an arithmetic question for a tax agent with your actual lease quote in front of them.
Not for profit and public health employers with FBT capped exempt benefits are a separate case with different rules. Do not apply a private sector rule of thumb to a hospital job.
There is also a plain case against sacrificing anything. If you are a recent arrival still absorbing set up costs, a locked away contribution is a poor swap for cash you need now. The same logic applies to housing: our cost of living guide for students in Brisbane sets out how quickly bond, rent in advance and furnishing eat a first pay cheque, and the Sydney and Melbourne cost comparison shows how much the same salary buys in different cities.
What your employer withholds, and why it under withholds
Employers do not know about your loan unless you tell them. You do that on the Tax File Number Declaration (NAT 3092) when you start a job by answering Yes at question 10, or on a Withholding Declaration (NAT 3093) if you are already employed, answering Yes at question 6.
If you do not tell them, the ATO's own wording is that this will likely result in a tax bill when you lodge.
Two other things matter. The loan component may not appear as a separate line on your payslip, because it is often folded into the single PAYG withholding total. And the amounts withheld do not touch your loan balance during the year: the compulsory repayment reduces the loan as a lump sum once the return is processed.
Withholding tracks the reduced salary your employer actually pays you. The assessment tracks repayment income, which includes what you sacrificed. The two reconcile only at lodgment.
The payslip and income statement checklist
Six things to check, and none of them take long.
Confirm your employer has recorded the loan. If PAYG withholding on a graduate salary looks light, ask payroll whether the declaration is on file.
Check the reportable employer super contributions field on your income statement in myGov. Whatever sits there is going back into your repayment income.
Check for a reportable fringe benefits amount, remembering that FBT years run 1 April to 31 March, so that figure covers a different twelve months from the rest of the statement.
Sanity check the RFBA by multiplying the taxable value of your benefits by 1.8868.
Check any rental or investment loss you are claiming, because it is added straight back.
Check the threshold for the year you are lodging, not the current one: $67,000 for 2025-26, $69,528 for 2026-27.
Frequently asked questions
Does salary sacrifice reduce my HECS repayment?
No. Salary sacrifice into super and salary packaged fringe benefits both reduce taxable income, but the ATO adds reportable employer super contributions and reportable fringe benefits back when it works out repayment income. Your compulsory repayment is calculated on the higher figure, so it stays the same or rises.
Can salary sacrificing actually increase my HECS repayment?
Yes, and this is the part people are not told. Because reportable fringe benefits are grossed up at 1.8868, packaging a benefit can add more to your repayment income than the pre-tax deduction takes out of your taxable income. A novated lease is the most common way this happens.
What is the difference between taxable income and repayment income? Taxable income is assessable income less deductions. Repayment income is that figure plus total net investment loss, reportable fringe benefits, exempt foreign employment income and reportable super contributions. Only repayment income is used for compulsory HELP repayments.
What is the HECS repayment threshold for 2025-26 and 2026-27?
For 2025-26 nothing is payable up to $67,000, then 15c for each $1 over $67,000, and $8,700 plus 17c for each $1 over $125,000 from $125,001. For 2026-27 the threshold is $69,528 on the same 15c basis, then $9,028 plus 17c for each $1 over $129,717.
Why did I get a tax bill even though my employer withheld for HECS?
Your employer withholds against the salary it actually pays you. If part of your salary is sacrificed, the withholding is calculated on the reduced amount while the assessment is calculated on repayment income including the sacrificed amount. The difference falls due at lodgment.
Does an electric car novated lease avoid the problem?
Not for HELP purposes. An eligible electric car can be exempt from fringe benefits tax, but the ATO states it is still a reportable fringe benefit. The employer works out a notional taxable value and reports it, and that amount goes into your repayment income.
Do I have to tell my employer about my HECS debt?
You tell them by answering Yes to the study and training support loan question on the Tax File Number Declaration when you start, or on a Withholding Declaration if you are already employed. If you do not, no extra amount is withheld and you are likely to face a bill at tax time.
Bottom line
Salary sacrificing into super with a HELP debt is usually still worth doing, for the plain reason that 15 per cent contributions tax beats a 30 per cent marginal rate. Just go in knowing that the HELP repayment will not fall, and that your employer will almost certainly under withhold, so set aside the difference rather than discovering it in October.
Salary packaging a car is a different question and deserves real scepticism. The gross-up means a $8,000 taxable value lands on your income statement as roughly $15,094, and that inflated figure is what your compulsory repayment is calculated on. Run the numbers on your specific lease quote, including whether an employee contribution method would reduce the reportable amount to nil, before you sign anything.
None of this is personal financial advice. Thresholds are indexed every year, FBT rules change, and your position depends on your visa status, tax residency, other income and your employer's packaging arrangement. Check it with a registered tax agent. If a tax bill would put your housing at risk, deal with that side early: knowing your rights as a student tenant in a private rental and what it takes to end an accommodation contract early is worth more than any packaging arrangement.
