Individual 2025
End of Financial Year

The Australian Government has proposed several updates to the study and training loan system, including HECS-HELP, VET Student Loans, and the Australian Apprenticeship Support Loan. These measures are aimed at easing the financial pressure on borrowers and are subject to the passage of legislation, expected to be introduced in Parliament after 22 July 2025. 20% reduction A 20% reduction in loan balances is planned to take effect on 1 June 2025. This reduction would apply to the loan balance on that date, prior to the application of indexation. For example, someone with a $50,000 debt may have their balance reduced by $10,000. This adjustment will be automatically applied by the ATO once the necessary legislation is in place. It is important to note that voluntary repayments made before 1 June 2025 will not be eligible for a refund or credit under this reduction initiative. Indexation The government has also made changes to the way student loan indexation is calculated. Instead of using only the Consumer Price Index (CPI), indexation will now be based on whichever is lower between the CPI and the Wage Price Index (WPI). This change has been backdated to cover indexation applied from 1 June 2023. As a result, the indexation rate for 2023 was reduced from 7.1% to 3.2%, and the rate for 2024 was reduced from 4.7% to 4.0%. Borrowers who were affected by the earlier, higher rates have received loan balance adjustments or refunds, which can be viewed in their ATO online accounts. Minimum income threshold From 1 July 2025, changes are also proposed to how loan repayments are calculated. The minimum income threshold for making compulsory repayments will increase from $54,435 to $67,000. In addition, a marginal repayment system will be introduced. This means that repayments will only apply to the portion of income above the threshold, rather than being calculated on the borrower’s full income. These changes are expected to reduce repayment obligations for many borrowers.

From 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) will no longer be tax-deductible. This change will impact how interest on unpaid or underpaid tax liabilities is treated, and it is important for all taxpayers to carefully consider how this may affect their tax position. While GIC and SIC may accrue over time, for tax purposes, they are often treated as being incurred from a specific day, usually the day the relevant assessment is issued. This means the timing of assessments can be critical. For example, if a notice of assessment is issued before 1 July 2025, at least some of the associated GIC or SIC might still be deductible. On the other hand, if the assessment is issued on or after 1 July 2025, the entire amount could be non-deductible even if some of the interest accrued in an earlier period. Until now, all taxpayers have been entitled to claim a deduction for GIC and SIC under a specific provision in the tax legislation. This provision will be repealed and a new rule inserted to ensure that these charges are non-deductible from 1 July 2025. The ATO will still have discretion to remit GIC and SIC, but the treatment of any remitted interest will differ depending on when it was incurred: •If deductible GIC or SIC (i.e. incurred before 1 July 2025) is later remitted, it will be included in your assessable income. •If non-deductible GIC or SIC (i.e. incurred from 1 July 2025 onwards) is remitted, it will not be assessable. In situations where GIC is incurred daily such as on unpaid tax debts it is expected that only the interest accrued and incurred up to 30 June 2025 will remain deductible. GIC incurred from 1 July 2025 will be non-deductible, even if it continues to relate to older tax debts. We encourage you to review your current tax position and discuss any exposure to GIC or SIC with us ahead of 30 June 2025.