HECS-HELP debts might be interest free, but they are set for a steep indexation this year! - MGD
10 May 2023

Jessica Harris

Client Adviser - Wealth

A HECS debt (otherwise known as a HELP debt) is an interest-free loan that allows you to slowly pay off your education as you reach certain taxable income thresholds. Whilst it is an interest-free loan, it is indeed, indexed (increased).

For several years prior to 2022, the indexation applied was between 0% and 2%, coinciding with record-low interest rates. On 1 June 2022, HECS debts were indexed by 3.9%. This year, the Australian Taxation Office has announced any amounts outstanding on HECS debts will be indexed by 7.1% on 1 June 2023 due to the cost of living crisis.

To put this into context, a HECS debt balance of $30,000 on 1 June 2023 will incur a lump sum increase of $2,130 to its existing loan. Depending on your assessable taxable income, this could add another year to your repayment timeframe.

To add fuel to the fire, indexation occurs on 1 June 2023, but all repayments made as pre-tax contributions each year from a person’s income are not cleared until after their tax return is completed and their taxable income is assessed (post 1 July 2023). This means that unless additional voluntary repayments are made before 1 June 2023, you will incur this indexation to the total outstanding amount on 1 June 2023.

For some, there is no alternative, and we ride the wave of indexation. However, at MGD we know that most of our clients like to help their children with education costs, sometimes in the form of HECS debt. Therefore, it is timely to consider your opportunity to assist in reducing some of your children’s HECS debt before the 7.1% indexation occurs on 1 June 2023.

If you would like to discuss how this might apply to your circumstances, please contact us on (07) 3391 5055 or via email at connect@mgdwealth.com.au.


Any advice included in this communication is general and has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Any tax information refers to current laws, is not based on your unique circumstances and should not be relied on as tax advice. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement.