Published: October 2025, Updated: July 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 2026-27 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 Australian Apprenticeship 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.
For 2026-27, that threshold is $69,528, up from $67,000 in 2025-26 through annual indexation. This is the second year of the marginal repayment system introduced on 1 July 2025, when the threshold jumped from $54,435, the calculation moved from a flat rate on total income to a marginal system, and all outstanding study debts received a one-off 20% reduction.
These settings affect both employees (who see the withholding on their payslips) and employers (who need to make sure their payroll systems are calculating against the current year's thresholds). 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. Borrowing under HECS-HELP, FEE-HELP, and VET Student Loans draws on a combined HELP loan limit, which for 2026 is $129,883 for most students, or $186,544 for medicine, dentistry, and veterinary science courses leading to initial registration and eligible aviation courses. The limit is indexed on 1 January each year, and repayments restore your available borrowing balance.
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, with limits set per six-month study period and indexed annually (higher amounts apply for study in Asia).
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.
Australian Apprenticeship Support Loans (formerly Trade Support Loans) support apprentices training in priority occupations, providing up to $27,048 over the life of an apprenticeship for 2026-27, paid monthly and weighted toward the early years. A 20% discount is applied to the loan balance upon successful completion, incentivising apprentices to finish their training. The one-off 20% debt reduction in 2025 applied to these loans as well, on top of the completion discount.
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 the employer withholds according to the ATO's published schedules.
The repayment thresholds are indexed each year in line with average weekly earnings. For the 2026-27 income year, the ATO's published structure is:
$0 to $69,528: no repayment.
$69,529 to $129,717: 15 cents for each dollar over $69,528.
$129,718 to $186,050: $9,028 plus 17 cents for each dollar over $129,717.
$186,051 and over: 10% of total repayment income.
Two practical points. First, anyone earning between $67,000 and $69,528 who was making compulsory repayments in 2025-26 falls back under the threshold this year, and payroll withholding should stop once the 2026-27 tax tables are applied. Second, because every band shifted upward, an employee on the same salary as last year repays slightly less.
The current settings sit on top of the biggest reform to study loan repayments in a generation. Three changes took effect on 1 July 2025.
The minimum repayment income threshold rose from $54,435 (in 2024-25) to $67,000, removing a large group of lower-income earners from the repayment system entirely. Someone earning $60,000 who was previously paying approximately 3% of their total income ($1,800 per year) now pays nothing. Indexation has since lifted the threshold to $69,528 for 2026-27.
This was 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 marginal system, repayments are calculated only on income above the threshold, the same way income tax brackets work. The practical effect is that most people pay less. Significantly less, in many cases.
The Universities Accord (Cutting Student Debt by 20 Per Cent) Act became law on 2 August 2025, and the ATO reduced all student and training support debts by 20% on balances that existed as at 1 June 2025. The reduction was applied before the 2025 indexation, which was then recalculated on the reduced amount.
For an employee with a $40,000 HELP 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, and most reductions were processed before the end of 2025, with more complex cases extending into early 2026.
Employee earning $75,000:
Under the old flat-rate system (last applied in 2024-25), $75,000 attracted approximately a 3.5% repayment rate on total income: around $2,625 per year.
For 2026-27, the repayment is 15% of the income above $69,528: ($75,000 minus $69,528) x 15% = $820.80 per year. That's a reduction of roughly $1,800, or around $69 per fortnight in additional take-home pay compared with the old system.
Employee earning $100,000:
Under the old system, approximately 5.5% of total income: around $5,500 per year.
For 2026-27: ($100,000 minus $69,528) x 15% = $4,570.80 per year.
Employee earning $140,000:
Under the old system, approximately 8.5% of total income: around $11,900 per year.
For 2026-27: $9,028 plus ($140,000 minus $129,717) x 17% = $9,028 + $1,748.11 = $10,776.11 per year.
Employee earning $200,000:
Under both the old and current systems, 10% of total repayment income: $20,000 per year. The 10% rate on total income now applies from $186,051 (up from $179,286 in 2025-26).
The biggest winners from the marginal system are employees earning between $69,528 and $129,717. The reduction is most dramatic at the lower end of this range.
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 $62,000 in salary but also has $10,000 in reportable super contributions has a repayment income of $72,000, which exceeds the $69,528 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 $69,528 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 2026-27 tax tables are installed. The ATO updated its withholding schedules, including the STSL formulas in Schedule 8, for payments made from 1 July 2026.
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 at the start of the financial year (which means withholding against last year's $67,000 threshold instead of $69,528), 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 guide for employers.
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 that reach the ATO before 1 June each year reduce the balance before annual indexation is applied, effectively saving money by reducing the base on which indexation is calculated. Two details matter here: indexation only applies to debt that has been on the account for more than 11 months, and the extra tax withheld from your pay through the year doesn't count, because it isn't credited against the loan until your tax return is processed, usually well after 1 June.
Whether voluntary repayments make financial sense depends on the individual's circumstances. STSL debts are indexed at the lower of CPI or the Wage Price Index (a rule in place since 1 June 2023), not charged at commercial interest rates. The indexation rate applied on 1 June 2026 was 2.8%, the lowest since 2021. If an employee can earn a return higher than 2.8% 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.
Payday Super is now live: from 1 July 2026, super contributions must be paid with every pay run and reach the employee's fund within 7 business days of payday. This doesn't directly change STSL calculations, but it does raise the stakes on payroll accuracy.
Each pay run now involves three separate withholding and payment components: PAYG income tax, STSL (for eligible employees), and super guarantee on qualifying earnings. All three need to calculate correctly and flow through STP each pay event. If your payroll configuration is wrong on any of them, the errors are visible to the ATO much faster than they used to be.
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 Australian Apprenticeship Support Loans. Repayments begin when the person's repayment income exceeds $69,528 (for the 2026-27 income year) and are collected through the payroll system alongside PAYG income tax.
What is the STSL repayment threshold for 2026-27?
The minimum repayment threshold is $69,528, up from $67,000 in 2025-26 and $54,435 in 2024-25. No compulsory repayments are required below this amount. Repayments use a marginal system: 15 cents per dollar on income above $69,528 (up to $129,717), then $9,028 plus 17 cents per dollar above $129,717 (up to $186,050), then 10% of total repayment income from $186,051.
How much will my STSL repayment be on an $80,000 salary?
On repayment income of $80,000 under the 2026-27 marginal system, the repayment is 15% of income above $69,528: ($80,000 minus $69,528) x 15% = $1,570.80 per year, or approximately $60 per fortnight. Under the old flat-rate system, the repayment on $80,000 would have been around $3,200 to $4,000, so most people in this range are paying substantially less than they were before the 2025 reforms.
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, Australian Apprenticeship 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 was the 20% HECS debt reduction?
From 1 June 2025, the ATO applied a one-off 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.
What was the HELP indexation rate in 2026?
The indexation rate applied on 1 June 2026 was 2.8%, the lowest since 2021. Indexation is set at the lower of CPI or the Wage Price Index and applies each 1 June to debt that has been on the account for more than 11 months. Voluntary repayments that reach the ATO before 1 June reduce the balance that gets indexed.
How does STSL affect my home loan application?
Lenders consider STSL debt when assessing borrowing capacity because the compulsory repayments reduce your disposable income. On an $80,000 income, a study debt now costs around $1,571 per year in compulsory repayments, which lenders factor into serviceability. The marginal system has reduced annual repayments for most borrowers, which slightly softens the impact on borrowing capacity compared with the old system, but the debt still matters. Making voluntary repayments to reduce or clear 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.
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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, and loan limits are as published by the Australian Government for 2026. Rates, thresholds, and loan limits 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.
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