Salary packaging can be a great way to save on tax and boost your take-home pay.
But if you have a HECS or HELP debt, there’s a catch, it can affect how much you repay on your student loan.
How salary packaging impacts HECS/HELP
HECS/HELP repayments are calculated on your Adjusted Taxable Income (ATI), not just your base salary.
Your ATI includes:
- Taxable income
- Salary packaged benefits
- Reportable fringe benefits (RFBA)
- Investment income (e.g., shares, dividends, rental income)
- Other assessable income streams
Even though salary packaging reduces your taxable income, the value of your packaged benefits is added back when calculating your ATI. This means you may move into a higher repayment bracket, increasing your annual HECS/HELP repayments.
2025 HECS/HELP Thresholds
The repayment thresholds change each financial year. For 2025, the minimum repayment starts once your ATI is over $55,000 (approx). The percentage of income you repay increases as your income climbs through the brackets.
You can check the latest repayment thresholds and rates directly on the ATO website here.
Example:
- Your base salary is $65,000.
- You package $10,000 in benefits, lowering your taxable income to $55,000.
- For HECS/HELP purposes, the $10,000 packaged is added back, making your ATI $65,000 again.
- If this places you in a higher repayment tier, your HECS/HELP repayments could be larger than expected.
How to Plan Ahead
1. Always tell your payroll or salary packaging provider if you have a HECS/HELP debt.
This ensures the correct repayments are deducted, avoiding a tax-time shock when the ATO adjusts your HECS/HELP debt.
2. Monitor your income brackets.
Check where you sit within the HECS/HELP thresholds for the current financial year. Adjusting your packaging amount could keep you in a comfortable bracket while still gaining tax savings.
3. Factor in other income.
Investment earnings, side hustles, or bonuses can push you up a tier. Keep these in mind when planning your packaging strategy.
4. Seek professional financial advice.
An accountant or financial advisor can calculate your best packaging level while ensuring you stay on top of your repayments.
Is Salary Packaging still worth it with HECS/HELP?
For most people, yes even with the HECS/HELP impact. The tax savings from salary packaging can still outweigh the increased repayment percentage. The key is finding the balance between packaged benefits and your HECS/HELP bracket.
For example, packaging items like novated leases or work-related expenses can deliver significant tax savings that easily justify a slightly higher student loan repayment.
Key takeaway
Salary packaging remains one of the best ways to reduce taxable income in 2025. If you have a HECS/HELP debt, the smartest move is to:
- Understand how ATI works,
- Review your repayment bracket, and
- Get advice on optimising your packaging.
FAQs about Salary Packaging and HECS/HELP
1. Does salary packaging delay my HECS/HELP repayment?
Not really. While salary packaging lowers taxable income, the ATO adds back your fringe benefits to calculate your repayment income. This means your repayments are based on your total earning capacity, not just your reduced taxable income.
2. What happens if I underpay my HECS/HELP?
If not enough is withheld during the year, the ATO will adjust the shortfall when you lodge your tax return. You may receive a smaller refund or an extra tax bill to cover the unpaid amount.
3. Can I avoid higher HECS/HELP repayments with salary packaging?
You can’t avoid repayments completely, but you can adjust how much you package to stay within a comfortable repayment bracket. It’s about balancing tax savings and debt repayments.
4. Should I still salary package if I have a large HECS/HELP debt?
Yes, in most cases salary packaging still provides overall financial benefits. It’s important to review your numbers with a professional to ensure you’re getting the best outcome.
The information supplied on this page is provided as an information guide only. It contains Remunerator (Aust) Pty Ltd ACN 074 423 966 interpretation of the current Tax Legislation which is subject to change at any time without notice and should not be relied on as a substitute for legal or other professional advice. Example uses income tax rates effective 1st July 2024.