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 for the 2026-27 income year, the minimum repayment threshold has moved again: it's now $69,528, up from $67,000 in 2025-26.
This is the second consecutive year of change. On 1 July 2025 the entire repayment system was overhauled: the threshold jumped from $54,435 to $67,000, the calculation shifted from a flat percentage on total income to a marginal system, and all outstanding study debts received a one-off 20% reduction. From 1 July 2026, the thresholds have been indexed upward, and the ATO has published new withholding tables to match.
For employees, the indexed threshold means slightly lower repayments and more take-home pay. For employers, it means confirming your payroll software has the 2026-27 tax tables installed and that STSL withholding is calculating against the new $69,528 threshold, not last year's figure.
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.
Updated: July 2026
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.
The repayment thresholds are indexed each year in line with average weekly earnings. For the 2026-27 income year (1 July 2026 to 30 June 2027), the ATO's published structure is:
Two practical implications for payroll. First, employees earning between $67,000 and $69,528 who had STSL withheld during 2025-26 should no longer have amounts withheld once your 2026-27 tax tables are in place. Second, every band has shifted, so an employee on the same salary as last year will have a slightly smaller STSL deduction each pay.
The ATO's updated withholding schedules, including Schedule 8 (the statement of formulas for STSL components), apply to payments made from 1 July 2026. Your payroll software should have picked these up automatically, but it's worth verifying, particularly for anyone in that $67,000 to $69,528 band.
The 2026-27 figures sit on top of a much bigger structural reform that took effect for the 2025-26 income year. Three changes landed at once, and they still shape how withholding works today.
The threshold jumped. The minimum repayment income threshold rose from $54,435 to $67,000, taking a large group of lower-income earners out of compulsory repayments entirely. Indexation has since lifted it to $69,528 for 2026-27.
Repayments moved to marginal rates. This was the biggest change. Previously, once an employee's income exceeded the threshold, the repayment rate applied to their entire income. Under the marginal system, repayments are calculated only on the income above the threshold, the same way income tax brackets work. Someone earning $80,000 in 2026-27 pays 15% of the $10,472 above the threshold, which is $1,570.80 per year. Under the old flat-rate system, the same person paid 3.5% of the full $80,000, or $2,800. That's a difference of over $1,200 a year in take-home pay.
All study debts were cut by 20%. The ATO applied a one-off 20% reduction to all outstanding student and training support debts that existed on 1 June 2025. This didn't change withholding calculations (the reduction applied to debt balances, not repayment rates), but it means a meaningful number of employees have reached zero balance earlier than they expected. When that happens, they should give you an updated withholding declaration so you can stop STSL 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 $69,529 to $129,717 bracket. The annual repayment is 15% of the income above $69,528: ($90,000 minus $69,528) x 15% = $3,070.80 per year.
Divided by 26 fortnightly pay periods, that's approximately $118.11 per fortnight in STSL withholding, on top of their regular PAYG tax.
For an employee earning $140,000, the calculation uses two brackets. The income between $69,528 and $129,717 contributes $9,028 (the figure the ATO uses in its published table). The remaining $10,283 above $129,717 is charged at 17 cents per dollar = $1,748.11. Total annual repayment: $10,776.11, or approximately $414.47 per fortnight.
For employees earning $186,051 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.
One detail employers often miss: you must withhold the STSL component from all of an employee's earnings, including taxable allowances, bonuses, and commissions. You do not withhold STSL from lump sum termination payments.
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 2026-27 tables installed, not the 2025-26 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 2025-26 tax tables, it's withholding STSL against the old $67,000 threshold. Employees earning between $67,000 and $69,528 are having STSL incorrectly deducted, and everyone above that is having slightly too much withheld. 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. This is more common than it used to be following the 20% debt reduction. 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.
Withholding STSL from termination payments. STSL applies to ordinary earnings, taxable allowances, bonuses, and commissions, but not to lump sum termination payments. Check how your software treats final pays.
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 2026-27?
The minimum repayment threshold for the 2026-27 income year is $69,528, up from $67,000 in 2025-26. Employees earning below this amount do not need to make compulsory repayments. The threshold is indexed each year in line with average weekly earnings.
How are STSL repayments calculated under the marginal system?
For 2026-27, repayments are calculated only on income above $69,528 using marginal rates: 15 cents per dollar from $69,529 to $129,717, then $9,028 plus 17 cents per dollar from $129,718 to $186,050, then 10% of total repayment income from $186,051. This marginal system replaced the old flat-percentage approach from 1 July 2025, where a single rate 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 $69,528 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 did not directly change payroll withholding calculations. The reduction lowered the total amount employees owe, which means some employees have reached zero balance sooner and notified their employer to stop withholding. The repayment rates and thresholds used for payroll withholding were 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.
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We review and check this guide periodically. At the time of writing (July 2026), all information was current. STSL repayment thresholds and rates are for the 2026-27 income year as published by the ATO. Rates and thresholds are subject to annual adjustment. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Always confirm current rates with the ATO or a registered tax professional.
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