Worked Examples and Checklists
Should you make voluntary HELP repayments? A worked comparison
Compare voluntary HELP repayments with saving, an offset account or super, using after-tax returns, indexation timing around 1 June and the effect on borrowing and cash flow.
A voluntary HELP repayment "earns" you the indexation you avoid, and nothing else: there is no interest on HELP debts and no bonus for paying early. So the question is whether the same money would do better elsewhere after tax. If you have a home loan, putting cash in an offset account usually beats an extra HELP payment, because mortgage rates are typically higher than indexation. If your only alternative is a taxed savings account, the two can be close. Paying off HELP can still make sense when you want higher take-home pay, stronger borrowing capacity or simply no debt, especially if you can pay just before 1 June, when indexation is applied.
This guide sets out a method you can repeat with the HELP debt payoff estimator, with worked examples. It builds on the HELP thresholds guide and the step-by-step tax guide. Rates used are assumptions for illustration, not forecasts; this is general information.
How the debt grows and shrinks
- Indexation is applied on 1 June each year to the part of the balance that has been outstanding for 11 months or more. Since the 2024 reform it is the lower of CPI and the Wage Price Index. The 2025 reform also cut balances by 20% as at 1 June 2025.
- Compulsory repayments are withheld from your pay through the year, but they are credited to your HELP account only when your tax return is assessed. Until then, the balance in myGov may look higher than you expect.
- Voluntary repayments are credited when received. A payment made before 1 June reduces the balance indexed that year.
The comparison method
For each option, compare the after-tax annual benefit of $1 placed there:
| Option | Benefit per $1 per year | Taxed? |
|---|---|---|
| Voluntary HELP repayment | Indexation rate avoided | No (not income, not deductible) |
| Savings account | Interest rate × (1 − your marginal rate) | Yes |
| Mortgage offset account | Home loan rate avoided | No |
| Extra concessional super contribution | Investment return plus the immediate tax saving | 15% in the fund; money locked away |
| Paying off a credit card or personal loan | That loan's rate avoided | No |
Example 1: savings account
Illustrative: $10,000 in savings earning 4.5%, marginal rate 32% (2026–27, income between $45,001 and $135,000), assumed indexation 3%.
- Savings after tax: 4.5% × (1 − 0.32) = 3.06%, about $306 a year.
- HELP repayment: 3% avoided, about $300 a year.
Almost a tie. With indexation of 4% the HELP payment would win; with a lower rate or a lower tax bracket, saving wins. Keep in mind that savings remain accessible, while a HELP repayment cannot be taken back.
Example 2: home loan with offset
Same person, but with a mortgage at an assumed 6%:
- Offset: 6% avoided, untaxed, about $600 a year.
- HELP repayment: about $300 a year.
The offset is about twice as valuable, and you can still draw on the money.
Example 3: clearing the debt before a home loan application
Illustrative: HELP balance $8,000, repayment income $95,000 in 2026–27. The compulsory repayment is 15% × ($95,000 − $69,528) = $3,820.80 a year, about $318 a month. Lenders usually treat it as a commitment that reduces the amount they will lend. Paying $8,000 now removes that commitment. For some applicants, the borrowing capacity gained matters more than the indexation saved. Ask the lender or a broker how they treat a HELP balance that has been repaid.
Timing around 1 June
Because indexation is applied once a year, timing matters:
| Payment date | Effect on indexation that year |
|---|---|
| Late May | Reduces the balance indexed on 1 June |
| Early June | Indexation already applied that year |
| Just before lodging your return | Compulsory repayment for the year may be about to be credited; check before paying extra so you don't pay more than you owe |
ATO payments by BPAY or card can take a few business days to be credited. Pay well before 1 June if that is your goal, and check the ATO's guidance on when voluntary payments count.
Cash flow after the debt is gone
Once the balance reaches zero, employers stop withholding the extra amount after you update your details (tell them via a new withholding declaration). For the person in Example 3, that adds roughly $318 a month to take-home pay. That is not a new saving; it is money that was going to the debt anyway, but it can make budgeting easier.
When a voluntary repayment is less attractive
- You have no emergency fund. HELP repayments cannot be withdrawn later.
- You have higher-interest debt such as a credit card or car loan.
- Your income is likely to stay below the threshold for long periods (for example caring responsibilities or study), so compulsory repayments may not start soon.
- You expect to move overseas and are unsure of your obligations; check the ATO's overseas repayment rules first.
FAQ
Is there still a bonus for voluntary repayments?
No. The voluntary repayment bonus was abolished from 1 January 2017.
Can I claim a voluntary HELP repayment as a tax deduction?
No. Repayments are not deductible.
What happens to a HELP debt when someone dies?
The remaining debt is cancelled, although a compulsory repayment for income earned before death can still be raised against the estate. Check the ATO's page on HELP and deceased estates for details.
Will a voluntary payment reduce this year's compulsory repayment?
Only if it clears the debt. Otherwise the compulsory amount is still calculated on your repayment income, up to the remaining balance.
Sources
- Australian Taxation Office — voluntary repayments, indexation, repayment thresholds, overseas obligations
- StudyAssist — HELP debt information from the Department of Education
- Moneysmart — guidance on paying off debt and offset accounts
Related: salary sacrifice worked example, take-home pay calculator.
