Published: October 2025, Updated March 2026
If you've seen "STSL" on a payslip and weren't sure what it meant, or if you're an employer trying to figure out how much to withhold from an employee with a study loan, this guide covers everything you need to know for the 2025-26 financial year.
STSL stands for Study and Training Support Loans. It's the mechanism through which the Australian government collects repayments on education debts, including HECS-HELP, FEE-HELP, VET Student Loans, and Trade Support Loans. Repayments are withheld through the payroll system, similar to PAYG income tax, and only kick in once the person's income exceeds a specific threshold.
From 1 July 2025, the system changed substantially. The repayment threshold increased from $54,435 to $67,000. The calculation moved from a flat rate on total income to a marginal system that only applies to income above the threshold. And all outstanding study debts received a 20% reduction.
These changes affect both employees (who will see different amounts on their payslips) and employers (who need to make sure their payroll systems are calculating correctly). This guide covers both sides.
STSL tax is the compulsory repayment amount withheld from a person's pay toward repaying a government-funded study or training loan. It's not technically a separate tax. It's an additional withholding amount that sits on top of regular PAYG income tax, collected through the same payroll and STP reporting system.
The "tax" label is a simplification. The money goes toward reducing your education debt, not into general government revenue. But because it's collected through the tax system and appears as a deduction on your payslip, it looks and feels like a tax from the employee's perspective.
STSL is the umbrella term. It covers multiple loan types, all of which are repaid through the same mechanism.
HECS-HELP is the most common. It covers Commonwealth-supported university students who pay a student contribution amount. The government pays the remainder of the course cost, and the student repays their contribution over time through the tax system. Most Australians with a study debt have a HECS-HELP loan.
FEE-HELP covers full-fee-paying students in higher education. The loan amount is typically larger than HECS-HELP because it covers the entire course fee rather than a subsidised contribution amount. FEE-HELP has a lifetime limit (currently $178,606 for most students, higher for medicine, dentistry, and veterinary science).
VET Student Loans cover diploma-level and above vocational education courses. These loans have caps that vary by course and include stricter eligibility criteria than the earlier VET FEE-HELP scheme, which was reformed after concerns about provider quality and student outcomes.
OS-HELP provides loans for students studying part of their Australian course overseas. The maximum loan per study period is approximately $8,056 for students studying in Asia and $6,914 for other locations.
Student Start-up Loans and ABSTUDY SSL provide financial support to higher education students receiving Youth Allowance, Austudy, or ABSTUDY Living Allowance. These replaced the former Student Start-up Scholarship.
Trade Support Loans support apprentices in designated trades, providing up to $22,890 throughout an apprenticeship (as at 2024-25). A 20% discount is applied to the loan balance upon successful completion, incentivising apprentices to finish their training.
Student Financial Supplement Scheme is no longer active for new loans but some Australians still have outstanding SFSS debts being collected through the tax system. This scheme operated between 1993 and 2003.
Regardless of which loan type an employee has, the payroll withholding and reporting process is identical. The employee declares their debt on their TFN declaration, and you withhold according to the ATO's published schedules.
Three changes took effect on 1 July 2025 that fundamentally altered how STSL repayments work.
The minimum repayment income threshold jumped from $54,435 (in 2024-25) to $67,000. Anyone earning below $67,000 no longer makes compulsory repayments, even if they were previously having STSL deducted from their pay.
This change alone removed thousands of lower-income earners from the repayment system. Someone earning $60,000 who was previously paying approximately 3% of their total income ($1,800 per year) now pays nothing.
The threshold will continue to be indexed annually in line with average weekly earnings.
This is the most significant change. Under the old system, once your income exceeded the threshold, a flat repayment rate was applied to your entire income. The rate varied by income bracket, but the critical point was that it applied to all of your income, not just the amount above the threshold.
This created what's sometimes called a "cliff effect." An employee earning just above the old threshold would suddenly owe a percentage of their entire income, creating a disproportionate hit relative to the income increase that triggered it.
Under the new marginal system, repayments are calculated only on income above $67,000. The rates are:
$0 to $67,000: no repayment.
$67,001 to $125,000: 15 cents for each dollar over $67,000.
$125,001 to $179,285: $8,700 plus 17 cents for each dollar over $125,000.
$179,286 and over: 10% of total repayment income.
The practical effect is that most people pay less. Significantly less, in many cases.
Employee earning $75,000:
Under the old 2024-25 system, $75,000 fell into a bracket with approximately a 3.5% to 4% repayment rate on total income. Compulsory repayment was approximately $2,625 to $3,000 per year.
Under the new 2025-26 system, the repayment is 15% of the income above $67,000: ($75,000 minus $67,000) x 15% = $1,200 per year. That's a reduction of approximately $1,400 to $1,800, or roughly $54 to $69 per fortnight in additional take-home pay.
Employee earning $100,000:
Under the old system, approximately 5% to 6% of total income: $5,000 to $6,000 per year.
Under the new system: ($100,000 minus $67,000) x 15% = $4,950 per year. A modest reduction, with the benefit increasing as the difference between old and new calculations widens at different income levels.
Employee earning $140,000:
Under the old system, approximately 8.5% of total income: $11,900 per year.
Under the new system: $8,700 plus ($140,000 minus $125,000) x 17% = $8,700 + $2,550 = $11,250 per year. A small reduction at this level.
Employee earning $200,000:
Under both old and new systems, 10% of total repayment income: $20,000 per year. No change at this income level, as the 10% rate on total income applies above $179,286 under both systems.
The biggest winners from the new system are employees earning between $67,000 and $125,000. The reduction is most dramatic at the lower end of this range.
The ATO commenced reducing all student and training support debts by 20% on balances that existed as at 1 June 2025. This reduction was applied before the 2025 indexation. Indexation was then recalculated on the reduced amount.
For an employee with a $40,000 HECS debt as at 1 June 2025, the reduction was $8,000, bringing the balance to $32,000 before indexation was applied. The 2025 indexation rate was 3.2%, applied to the reduced $32,000, adding $1,024 and bringing the post-indexation balance to $33,024.
This reduction was automatic. Employees didn't need to apply. The ATO issued notifications via SMS, email, or myGov inbox. Most reductions were processed before the end of 2025, with more complex cases extending into early 2026.
Repayment income is not the same as salary or gross pay. It's a broader measure that the ATO uses to determine compulsory repayment amounts. It includes taxable income (excluding any assessable First Home Super Saver released amounts), reportable fringe benefits (regardless of the employer's FBT exempt status), total net investment losses (including net rental losses), reportable super contributions, and exempt foreign employment income.
This means someone who earns $60,000 in salary but also has $10,000 in reportable super contributions has a repayment income of $70,000, which exceeds the $67,000 threshold and triggers compulsory repayments even though their salary alone would not.
For employers, the practical implication is that your payroll withholding is based on the employee's earnings from your business alone. You won't know about their investment losses, super from other sources, or other income. The ATO reconciles the total repayment income when the employee lodges their tax return, refunding any over-withholding or billing any shortfall.
If an employee declares a study loan on their Tax File Number declaration and their projected income exceeds the $67,000 threshold, you must withhold STSL in addition to regular PAYG tax.
The withholding amount is calculated using the ATO's published tax tables for the relevant pay frequency (weekly, fortnightly, or monthly). Your payroll software (Xero, MYOB Business, or other ATO-compliant software) handles this calculation automatically provided the employee's STSL status is flagged and the 2025-26 tax tables are installed.
You report STSL withholding through Single Touch Payroll Phase 2. STSL appears as a separate line item from PAYG withholding in your STP reports. Payment deadlines are the same as for PAYG: quarterly for small withholders, monthly or more frequently for larger withholders.
Common mistakes include not updating tax tables after 1 July 2025 (resulting in incorrect withholding using the old flat-rate method), not flagging the STSL status for new employees, and continuing to withhold after an employee clears their debt.
For a detailed step-by-step guide on setting up STSL in Xero, MYOB, and other payroll systems, see our STSL employer payroll guide.
Employees can make voluntary repayments at any time to reduce their STSL debt faster. These are separate from the compulsory repayments deducted through payroll.
Voluntary repayments can be made through myGov or directly to the ATO. There's no minimum amount. Payments made before 1 June each year can reduce the balance before annual indexation is applied, effectively saving money by reducing the base on which indexation is calculated.
Whether voluntary repayments make financial sense depends on the individual's circumstances. STSL debts are indexed to CPI (or the wage price index, whichever is lower, from 2023 onward), not charged at commercial interest rates. For 2025, the indexation rate was 3.2%. If an employee can earn a return higher than 3.2% by investing the money instead of paying down their STSL, the voluntary repayment may not be the best use of their cash.
However, for employees approaching major financial milestones (particularly applying for a home loan, where the STSL debt affects borrowing capacity), making voluntary repayments to reduce the balance can be strategically worthwhile.
Employees with STSL debts who move overseas for more than 183 days in a 12-month period must lodge an overseas travel notification with the ATO. They continue to be liable for repayments based on their worldwide income, even though they're not earning in Australia.
The ATO assesses overseas residents' repayment obligations annually. Non-residents who fail to lodge the notification or make required repayments face penalties.
For employers with staff relocating overseas, the obligation to withhold STSL ends when the employee leaves your Australian payroll. The overseas repayment obligation transfers to the individual and the ATO.
From 1 July 2026, Pay day super requires super contributions to be paid at the same time as wages. This doesn't directly change STSL calculations, but it does add complexity to the payroll process.
Each pay run will now involve three separate withholding/payment calculations: PAYG income tax, STSL (for eligible employees), and super guarantee contributions. All three need to be processed correctly and reported through STP.
For businesses with employees who have STSL debts, the combined payroll burden of PAYG, STSL, and same-cycle super means getting your payroll software configuration right is more important than ever. Test your setup before July 2026 to make sure all three components calculate correctly together.
Our employee cost calculator shows the full cost of employment including super, and our ATO compliance health check can help verify your overall payroll compliance position.
What is STSL tax in Australia?
STSL stands for Study and Training Support Loans. It's the compulsory repayment amount withheld from an employee's pay toward repaying a government-funded education loan. It covers HECS-HELP, FEE-HELP, VET Student Loans, Student Start-up Loans, and Trade Support Loans. Repayments begin when the person's repayment income exceeds $67,000 (for the 2025-26 income year) and are collected through the payroll system alongside PAYG income tax.
What is the STSL repayment threshold for 2025-26?
The minimum repayment threshold is $67,000, up from $54,435 in 2024-25. No compulsory repayments are required below this amount. From 2025-26, repayments use a marginal system: 15 cents per dollar on income above $67,000 (up to $125,000), then $8,700 plus 17 cents per dollar above $125,000 (up to $179,285), then 10% of total repayment income above $179,286.
How much will my STSL repayment be on a $80,000 salary?
On repayment income of $80,000 under the 2025-26 marginal system, the repayment is 15% of income above $67,000: ($80,000 minus $67,000) x 15% = $1,950 per year, or approximately $75 per fortnight. Under the old flat-rate system, the repayment on $80,000 would have been approximately $3,200 to $4,000, so most people in this range will see a meaningful reduction.
Is STSL the same as HECS-HELP?
STSL is the broader term that includes HECS-HELP and other study loans (FEE-HELP, VET Student Loans, Trade Support Loans, etc.). HECS was the original scheme introduced in 1989, which evolved into HELP in 2005. For payroll withholding purposes, all loan types are treated identically under the STSL framework.
Are STSL repayments tax-deductible?
No. STSL repayments, whether compulsory or voluntary, are not tax-deductible. They are considered repayments of a debt, not a tax expense.
What is the 20% HECS debt reduction?
From 1 June 2025, the ATO applied a 20% reduction to all outstanding student and training support debts. This was automatic and applied before the 2025 indexation. For example, a $50,000 debt was reduced by $10,000 to $40,000, and then the 3.2% indexation was calculated on the reduced amount. Most reductions were processed before the end of 2025.
How does STSL affect my home loan application?
Lenders consider STSL debt when assessing borrowing capacity because the compulsory repayments reduce your disposable income. A $40,000 STSL debt with repayments of $3,000 per year may reduce your borrowing capacity by $30,000 to $50,000 depending on the lender. Making voluntary repayments to reduce the balance before applying can improve your borrowing position.
What happens if I have multiple jobs?
Each employer withholds STSL independently based on the earnings they pay you. The ATO reconciles your total repayment income across all sources when you lodge your tax return. If the combined withholding was too much, you receive a refund. If it was too little, you owe the difference.
Do I still have to repay my STSL if I move overseas?
Yes. If you live overseas for more than 183 days in a 12-month period, you must lodge an overseas travel notification with the ATO and make repayments based on your worldwide income. Failing to comply can result in penalties.
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight - all as a fully embedded team that works inside your business.
CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
Learn more about our embedded finance model at scalesuite.com.au/services/finance
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. The 20% debt reduction was applied to debts existing as at 1 June 2025. Rates, thresholds, and loan limits are subject to annual adjustment. This article is general information only and does not constitute tax or financial advice.
Sources:
ATO Study and Training Support Loans Repayment Thresholds and Rates 2025-26; ATO Study and Training Loans What's New (July 2025); Study Assist Loan Repayments (Australian Government); ATO Single Touch Payroll Phase 2 reporting; ATO Tax File Number Declaration guidance.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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
