Last month, the Labor government vowed to decrease student debt by 20 percent if elected, and this “transformative” reduction is likely to be enacted when parliament reconvenes on July 22.

This will impact your student debt balance if you have one and, eventually, your pay.

Once the legislation is passed, the Australian Tax Office (ATO) will implement the 20 percent cut, basing the calculation on the debt amount as of June 1, 2025.

“The ATO will automatically apply the 20 percent reduction to your remaining debt and will retroactively adjust any indexation that was applied to your debt,” CPA Australia’s business lead Gavan Ord informed 9news.com.au.

“No action is required from individuals. The government will notify you when the changes are implemented, and balances can be checked via myGov.”

This reduction will be applied on top of any repayments made throughout the year after your tax return is completed on June 30.

Ord said Australians should avoid listening to financial advice from online influencers about how to optimise their tax returns.

“We urge Aussies not to follow misleading advice from social media ‘finfluencers’ suggesting you delay lodging your tax return,” he said.

“Lodging your return is a legal responsibility and essential for accurate assessment.”

What happens if my HECS debt is finally paid off?

Compulsory HECS repayments aren’t allocated to your debt until after you have lodged your tax return.

After this, it might mean your debt has reached the all-important zero balance.

It means you will no longer see the compulsory repayments taken out of your weekly, fortnightly or monthly pay.

You’ll need to let your employer know about this though, as it won’t automatically stop.

It involves filling out a tax form called a “withholding declaration”, which indicates to your employer that you no longer have a HECS debt.

It’s as simple as ticking the box ”no” on the form when it asks if you have a higher Education Loan Program (HELP), VET Student Loan (VSL), Financial Supplement (FS), Student Start-up Loan (SSL) or an Australian Apprenticeship Support Loan (AASL) debt.

Once your employer stops withholding extra tax, your next paycheck may slightly increase.

This amount will vary depending on your salary and what your regular contributions were.

You have to be earning above the threshold for it to impact your pay.

Australian taxpayers earning between $54,435 and $62,850 pay one per cent on their income and the figure rises the more you earn.

“Another proposed change to HECS is raising the income threshold at which people are required to start repaying their debt from $54,435 to $67,000, starting 1 July 2025, subject to the law being changed,” Ord added.

“This means that if you earn less than $67,000, you won’t need to make repayments, although voluntary repayments remain an option.

“This change also means your repayments will be lower.”

If you’ve overpaid your HECS debt throughout the previous financial year, the ATO will take this into account and it will be refunded to you when you lodge your tax return.