If you run payroll for even one employee, there's a reasonable chance someone on your team has a HECS-HELP or other study loan. Approximately three million Australians carry a student debt. And from 1 July 2025, the way you calculate and withhold repayments changed significantly.
The minimum repayment threshold jumped from $54,435 to $67,000. The calculation method shifted from a flat percentage on total income to a marginal system where repayments only apply to income above the threshold. And all outstanding study debts received a 20% reduction.
For employees, this mostly means lower repayments and more take-home pay. For employers, it means updated tax tables, revised withholding calculations, and the need to make sure your payroll software is actually using the right numbers.
This guide covers what you need to know as the person running payroll, not as the person with the debt. If you're looking for an explanation of STSL from the employee's perspective, see our comprehensive STSL guide.
STSL stands for Study and Training Support Loans. It's the umbrella term the ATO uses for all government-funded education debts that are repaid through the tax system. When you see "STSL" on a payslip or in your payroll software, it refers to the additional withholding amount deducted from an employee's pay to go toward repaying their study loan.
The loans covered under STSL include HECS-HELP (the most common, for Commonwealth-supported university students), FEE-HELP (for full-fee-paying students), VET Student Loans (for vocational education), Student Start-up Loans, ABSTUDY Student Start-up Loans, OS-HELP (for overseas study components), and Trade Support Loans.
As an employer, you don't need to know which specific loan type your employee has. The withholding calculation and reporting process is the same regardless. What matters is whether the employee has declared a study loan on their Tax File Number declaration, and whether their projected income exceeds the repayment threshold.
The key point for payroll: STSL withholding is additional to regular PAYG withholding. It's reported through Single Touch Payroll (STP Phase 2) alongside your normal tax withholding. The ATO reconciles the actual repayment amount when the employee lodges their tax return.
Three significant changes took effect for the 2025-26 income year. All of them affect how much you withhold from employees with study loans.
The minimum repayment income threshold rose from $54,435 to $67,000. This means employees earning below $67,000 no longer need to make compulsory repayments, even if they were previously having STSL amounts withheld.
If you have employees who were just above the old threshold (say, earning $55,000 to $66,999), you should no longer be withholding STSL from their pay. Your payroll software should have updated automatically when you installed the new tax tables, but it's worth checking manually for anyone in that income range.
This is the biggest change. Previously, once an employee's income exceeded the threshold, the repayment rate applied to their entire income. Under the new system, repayments are calculated only on the income above $67,000, using marginal rates.
The 2025-26 repayment structure works as follows:
Repayment income of $0 to $67,000: no repayment required.
Repayment income of $67,001 to $125,000: 15 cents for each dollar over $67,000.
Repayment income of $125,001 to $179,285: $8,700 plus 17 cents for each dollar over $125,000.
Repayment income of $179,286 and over: 10% of total repayment income.
For most employees, this means lower repayments than under the old system. Someone earning $80,000 previously paid a flat percentage on the full $80,000. Now they pay 15% of the $13,000 above the threshold, which equals $1,950 per year, significantly less than the old calculation.
The ATO commenced applying a 20% reduction to all outstanding student and training support debts that existed on 1 June 2025. This doesn't directly affect your payroll withholding calculations (the reduction applies to the debt balance, not the repayment rate), but it means some employees may reach zero balance sooner than expected and notify you to stop withholding.
In practice, most employers don't manually calculate STSL amounts. Your payroll software (Xero, MYOB, or another ATO-compliant system) does it for you, provided the tax tables are current and the employee's STSL status is correctly flagged.
But understanding the calculation helps you verify that your software is producing the right numbers and troubleshoot when something looks wrong.
Here's a worked example for an employee earning $90,000 per year, paid fortnightly.
Their repayment income of $90,000 falls in the $67,001 to $125,000 bracket. The annual repayment is 15% of the income above $67,000: ($90,000 minus $67,000) x 15% = $3,450 per year.
Divided by 26 fortnightly pay periods, that's approximately $132.69 per fortnight in STSL withholding, on top of their regular PAYG tax.
For an employee earning $140,000, the calculation uses two brackets. The first $58,000 above $67,000 (up to $125,000) is charged at 15 cents per dollar = $8,700. The remaining $15,000 above $125,000 is charged at 17 cents per dollar = $2,550. Total annual repayment: $11,250, or approximately $432.69 per fortnight.
For employees earning $179,286 or more, the calculation reverts to 10% of total repayment income. This means someone earning $200,000 pays $20,000 per year in STSL repayments.
The ATO publishes weekly, fortnightly, and monthly withholding schedules that translate these annual amounts into per-pay-period figures. These are the tables your payroll software uses. Make sure your software has the 2025-26 tables installed, not the 2024-25 versions.
This is where employers occasionally get caught out. Repayment income is not the same as taxable income, and it's not the same as gross salary.
Repayment income includes taxable income (excluding any assessable First Home Super Saver released amounts), reportable fringe benefits (regardless of exempt status), total net investment losses (including rental losses), reportable super contributions, and exempt foreign employment income.
As an employer, you withhold based on the employee's projected ordinary earnings from your payroll. You won't know about their investment losses, reportable super from other sources, or other income. The ATO sorts out the difference at tax time.
This means your withholding throughout the year is an estimate. If the employee has additional income sources or deductions that change their total repayment income, the ATO will either refund or bill the difference when they lodge their return.
The process varies by platform, but the principles are the same.
When you add or edit an employee, go to the Tax section and tick the "Has study loan" or "STSL" checkbox. Xero uses the ATO's published withholding schedules to automatically calculate the additional withholding based on the employee's earnings and pay frequency. Make sure your Xero tax tables are up to date (Xero typically updates these automatically, but verify in Settings > Payroll Settings > Tax Tables).
In the employee's Payroll Details, navigate to the Tax section. Select the STSL/HELP debt checkbox. MYOB Business uses the current ATO tax tables to calculate withholding. As with Xero, ensure your MYOB installation has the latest tax table update applied. If you recently transitioned from MYOB Essentials or AccountRight to the new MYOB Business platform, double-check that employee STSL flags carried over correctly during the migration.
Any ATO-compliant payroll software will have an STSL withholding option. The setup is typically a checkbox or toggle on the employee's tax details screen. If your software doesn't have this option, it may not be STP Phase 2 compliant, which is a larger problem.
Not updating tax tables. If your payroll software is still using the 2024-25 tax tables, it's withholding STSL using the old $54,435 threshold and the old flat-rate method. Employees earning between $54,435 and $67,000 are having STSL incorrectly deducted. Employees above $67,000 are likely having too much deducted. Update your tables immediately.
Ignoring new employee TFN declarations. When a new employee starts, they declare their STSL status on their Tax File Number declaration. If you don't process this declaration or miss the STSL checkbox, you won't withhold the required amount, and the employee will face a bill at tax time.
Not adjusting for employees who clear their debt. When an employee's STSL debt reaches zero, they should notify you via an updated withholding declaration. You then stop STSL withholding. If you continue withholding after the debt is cleared, the money still goes to the ATO and the employee gets it back at tax time, but it's unnecessary and creates frustration.
Forgetting about multiple jobs. If an employee has a second job, both employers withhold STSL independently based on their respective earnings projections. The ATO reconciles at tax time. There's nothing additional you need to do, but it's worth noting if an employee asks why their total STSL seems high.
Confusing STSL with PAYG. STSL withholding is separate from PAYG income tax withholding. Both are reported through STP, but they're different line items. Don't combine them.
STSL withholding is reported through Single Touch Payroll as part of your regular pay event reporting. Under STP Phase 2, STSL amounts are reported separately from PAYG withholding, giving the ATO a clear view of both components.
The payment deadlines for STSL follow the same schedule as PAYG. If you're a small withholder (withholding $25,000 or less per year), you pay quarterly, due 28 days after the end of each quarter. If you're a medium or large withholder, you pay either monthly or within a few days of the pay event depending on your withholding amount.
Your STP-compliant payroll software handles the reporting categorisation automatically. The key obligation is to file your STP reports on time, with accurate amounts.
If your STP reporting is late or incorrect, it can delay your employees' tax return processing and create compliance issues for your business. The ATO uses STP data to pre-fill employee tax returns, so accuracy matters.
When your employee lodges their tax return, the ATO calculates their actual STSL repayment based on their total repayment income for the year (not just what they earned from you). The ATO compares the actual repayment to the amount you withheld throughout the year.
If you withheld more than the actual repayment: the employee receives a refund (assuming no other tax debts).
If you withheld less than the actual repayment: the employee owes the difference to the ATO.
This reconciliation is handled between the ATO and the employee. There's no adjustment required from you as the employer. Your obligation is to withhold correctly based on the information available to you (the employee's declared earnings and STSL status), and to report accurately through STP.
What is STSL tax on a payslip?
STSL on a payslip is the amount withheld from an employee's pay toward repaying their government study or training loan. It stands for Study and Training Support Loans and covers debts including HECS-HELP, FEE-HELP, VET Student Loans, and Trade Support Loans. The amount is calculated based on the employee's projected income and the ATO's current repayment thresholds and rates.
What is the STSL repayment threshold for 2025-26?
The minimum repayment threshold for the 2025-26 income year is $67,000, up from $54,435 in 2024-25. Employees earning below this amount do not need to make compulsory repayments. The threshold is adjusted each year in line with average weekly earnings.
How are STSL repayments calculated under the new marginal system?
From 2025-26, repayments are calculated only on income above $67,000 using marginal rates: 15 cents per dollar from $67,001 to $125,000, then $8,700 plus 17 cents per dollar from $125,001 to $179,285, then 10% of total repayment income above $179,286. This replaces the old system where a flat percentage applied to the employee's entire income once they exceeded the threshold.
Do I need to withhold STSL for casual or part-time employees?
You withhold STSL for any employee who has declared a study loan on their TFN declaration and whose projected annual income from your payroll exceeds the $67,000 threshold. For casual or part-time employees whose earnings fluctuate, use the ATO's withholding schedules based on each pay period's earnings. The ATO reconciles the actual repayment at tax time if the total annual income is different from projections.
Is STSL the same as HECS?
STSL is the broader category that includes HECS-HELP and other study loans. HECS was the original scheme introduced in 1989 for university students. It evolved into HELP (Higher Education Loan Program) in 2005 to include more loan types. STSL is the payroll and tax system term that encompasses all of these loans. For withholding purposes, they're all handled the same way.
What happens if I withhold STSL from an employee who doesn't have a debt?
If an employee incorrectly declared a study loan or if their debt has been fully repaid, you should stop withholding once notified. Any amounts already withheld will be credited to the employee when they lodge their tax return. You cannot refund STSL directly through payroll, it must go through the ATO's tax return process.
How did the 20% debt reduction affect payroll?
The 20% reduction applied to debt balances as at 1 June 2025 does not directly change payroll withholding calculations. The reduction lowered the total amount employees owe, which means some employees may reach zero balance sooner and notify you to stop withholding. However, the repayment rates and thresholds used for payroll withholding are unchanged by the debt reduction.
Do overseas employees still need STSL withheld?
If an employee with an STSL debt works overseas for more than 183 days in a 12-month period, they must lodge an overseas travel notification with the ATO and make repayments based on their worldwide income. As an Australian employer, your obligation is to withhold based on Australian-sourced earnings. The overseas repayment obligation is between the employee and the ATO.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses. Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire, without the recruitment risk, training time, or full-time salary commitment.
If your payroll needs attention, whether it's STSL withholding or STP compliance, drop the team a message or book a free 30-minute call.
We review and check articles periodically. At time of writing, all data and sources were current and accurate. STSL repayment thresholds and rates are for the 2025-26 income year as published by the ATO. Rates and thresholds are subject to annual adjustment. This article is general information only and does not constitute tax or financial advice. Always confirm current rates with the ATO or a registered tax professional.
Sources:
ATO Study and Training Support Loans Repayment Thresholds and Rates 2025-26; ATO Study and Training Loans What's New (July 2025); ATO Single Touch Payroll Phase 2 reporting requirements; ATO Tax File Number Declaration guidance; Study Assist Loan Repayments guidance (Australian Government).
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
Considering hiring finance staff?
We'll show you the full cost of an internal hire vs our embedded team, and exactly how much you'd save.
We'll reply within 24 hours to book your free 30-minute call.
No lock-in contracts and 30-day money-back guarantee.
Prefer to book directly? Schedule your free 30-minute call here
