If you’re heading off on parental leave with a HECS-HELP debt, one of the first money questions worth answering is: what happens to my compulsory HELP repayments while I’m earning less? The short answer is reassuring for most families — a lower income year usually means little or no compulsory repayment. But there are a few moving parts that catch new parents by surprise, and indexation is the big one.
Parental leave in Australia comes in several flavours: the government’s Paid Parental Leave (PPL) scheme, employer-paid parental leave top-ups, and plain unpaid time at home. Each is treated slightly differently for tax and HELP purposes.
How compulsory HELP repayments work
Once you have a HELP, HECS-HELP or other study and training support loan debt, you’re liable for a compulsory repayment through the tax system whenever your repayment income reaches the minimum threshold. Repayment income is broader than salary alone — it includes taxable income plus things like reportable fringe benefits, reportable super contributions, total net investment losses and exempt foreign income.
For the 2025-26 income year the compulsory repayment is calculated on a marginal rate system:
| 2025-26 repayment income | Compulsory repayment rate |
|---|---|
| $67,000 to $125,000 | 15 cents for each $1 over $67,000 |
| $125,001 to $179,285 | $8,700 plus 17 cents for each $1 over $125,000 |
| $179,286 and above | 10% of total repayment income |
So at a repayment income of $80,000, the compulsory repayment is 15 cents on $13,000 — about $1,950 for the year. Earn below $67,000 and there’s no compulsory repayment at all. (For 2026-27 the minimum repayment income threshold rises to $69,528 — but the figures in this article use the 2025-26 year.) If your exact numbers are on the edge, run them through our HECS/HELP calculator to see precisely where you land.
Paid Parental Leave is taxable — and counts toward repayment income
This is the point most people miss. Payments under the government Paid Parental Leave scheme are taxable income, and they count toward your HELP repayment income. Taking PPL doesn’t freeze your debt — it just changes how much income you’re likely to have.
Key facts about the current PPL scheme:
- For a child born or adopted from 1 July 2026, PPL is 130 days (26 weeks) paid at $200.94 per day — $1,004.70 per week. Taking the full entitlement means $26,122.20 before tax for the year.
- Eligibility requires a work test: 330 hours worked in 10 of the 13 months before the birth or adoption. There’s also an individual adjusted taxable income limit of $186,487 (based on the 2025-26 reference year).
- The government also pays 12% superannuation on PPL for children born or adopted from 1 July 2025. It’s paid by the ATO as a lump sum after the financial year ends — it’s super, not spending money, but it’s real retirement savings most parents never had before.
The 15% PPL tax withholding trap
Services Australia withholds tax from your PPL payments at a default rate of 15% unless you nominate a different rate. That flat 15% rarely matches your actual marginal tax rate for the year.
Here’s why that matters. In 2025-26, resident marginal rates (including the 2% Medicare levy) work roughly like this:
| 2025-26 taxable income | Marginal rate (incl. Medicare levy) |
|---|---|
| $0 – $18,200 | 0% |
| $18,201 – $45,000 | 18%* |
| $45,001 – $135,000 | 32% |
| $135,001 – $190,000 | 39% |
| $190,001+ | 47% |
*18% reflects the 16% income tax rate plus the 2% Medicare levy.
If you worked part of the year on a good salary, your total income may put you in the 32% bracket, meaning that 15% PPL withholding has underpaid your tax — you’ll owe the difference at tax time, with any compulsory HELP repayment assessed on top. If your total income is very low, you may have been over-withheld and be due a refund instead. You can ask Services Australia to withhold at a higher rate upfront to avoid a bill later — worth doing if you know you’ll also have decent salary income in the same year.
To check where your full year’s income lands, use our income tax calculator alongside the HECS calculator.
Employer-paid parental leave also counts
Many employers top up PPL or run their own paid parental leave schemes. Whatever your employer pays you while on leave is also taxable income and counts toward your HELP repayment income, just like salary.
This is where some higher-income earners get caught: generous employer-paid leave plus part-year salary can push your repayment income over the $67,000 threshold even though you feel like you spent half the year at home. If your employer is paying you 16 or 20 weeks at full pay plus you’re receiving PPL, add them together with any salary earned that year before assuming you owe nothing.
Worked example: $90,000 salary, 6 months leave
Let’s walk through a realistic scenario. Priya earns $90,000 a year. She works six months of the financial year ($45,000 of salary) and then takes six months of parental leave, receiving roughly half the full PPL entitlement — about $13,061.
| Income source | Amount |
|---|---|
| Salary (6 months) | $45,000 |
| Paid Parental Leave (~13 weeks) | $13,061 |
| Total repayment income | ≈ $58,061 |
At $58,061, Priya is below the $67,000 minimum repayment income — so she owes no compulsory repayment for the year. Any extra PAYG withheld for HELP from her employer’s payroll while she worked is refunded when she lodges.
But — and this is the important part — indexation still applies. Indexation of 2.8% was applied to HELP debts on 1 June 2026, and it applies to any balance that is 11 or more months old, even if you earned nothing all year. Priya’s debt grows by 2.8% regardless of her low income.
The table below shows how the outcome changes with different income mixes in the leave year:
| Scenario (2025-26) | Repayment income | Compulsory HELP repayment |
|---|---|---|
| Full year at $58,000 salary | $58,000 | $0 — below threshold |
| $45,000 salary + $13,061 PPL | $58,061 | $0 — below threshold |
| $55,000 salary + $20,000 employer-paid leave | $75,000 | 15c × $8,000 = $1,200 |
| $70,000 salary + $26,122 full PPL | $96,122 | 15c × $29,122 = $4,368 |
Indexation: your debt grows while you earn less
Indexation is the part of the HELP system that keeps working while you’re on leave. Each year on 1 June, outstanding HELP debts that are at least 11 months old are increased by the indexation rate to keep them in line with the cost of living. The 2.8% applied on 1 June 2026 was the lowest indexation since 2021 — welcome, but still a real increase on a large balance.
A $40,000 debt growing at 2.8% adds $1,120 with no repayment offsetting it. Over a couple of years of parental leave, indexation compounds while compulsory repayments are zero — and the balance you return to is meaningfully larger than the one you left.
A few facts to keep straight:
- Indexation applies even with zero income. There’s no exemption for parental leave, unemployment or study.
- Only debts 11+ months old are indexed — very recent loans are skipped the first June.
- A voluntary repayment made before 1 June reduces the balance indexation is calculated on. If you have savings and a large HELP debt, a voluntary payment in May genuinely saves you the indexation on that amount.
- A one-off 20% reduction was already applied to HELP debts that existed on 1 June 2025. That’s done and dusted — don’t count on it happening again.
Should you make voluntary repayments while on leave?
Voluntary repayments are always allowed — there’s no minimum and no bonus for paying early (the old discount ended years ago). Whether it’s smart during parental leave depends on your situation:
- A payment before 1 June beats indexation on that amount — the one mathematically guaranteed win.
- Voluntary repayments don’t reduce or replace your compulsory repayment. If you’ll owe a compulsory amount at tax time, a voluntary payment on top doesn’t cancel it. And voluntary repayments are never refundable, so don’t pay more than you can comfortably spare.
- Cash buffer matters more. With a new baby and reduced income, most financial counsellors would prioritise an emergency fund over extra HELP payments — especially since HELP debt doesn’t accrue real interest, just indexation.
A common sweet spot: if you expect to land just under the $67,000 threshold this year, consider a modest voluntary payment in May to trim the balance before indexation — then reassess when you’re back at work.
Checklist: HECS and parental leave
- Add up everything — salary, PPL, employer-paid leave — to estimate your repayment income for the year.
- Compare against $67,000 (2025-26 threshold). Below it: no compulsory repayment. Above it: 15c per dollar over, on the marginal system.
- Review your PPL withholding. The default 15% may under-withhold if your total income is higher — nominate a higher rate with Services Australia if needed.
- Watch 1 June. Indexation applies regardless of income — consider a voluntary payment before then if you have the cash.
- Lodge your tax return. The ATO finalises your repayment income and any compulsory repayment when you lodge; over-withheld HELP amounts from payroll come back as a refund.
- Remember the 12% super on PPL (children born/adopted from 1 July 2025) — paid by the ATO after year end, it quietly keeps your retirement savings moving.
Frequently asked questions
Do I have to make HELP repayments while on parental leave?
Only if your total repayment income for the financial year reaches $67,000 (2025-26). Many people on leave fall below this because they’re only earning for part of the year. But if your combined salary, PPL and employer-paid leave push you over the threshold, the normal compulsory repayment applies.
Is Paid Parental Leave counted as income for HECS?
Yes. Government Paid Parental Leave is taxable income and is included in your repayment income for HELP purposes, exactly like wages. Employer-paid parental leave is treated the same way.
Does my HECS debt still grow while I’m on parental leave?
Yes — through indexation. On 1 June each year, debts that are 11 or more months old are increased by the indexation rate (2.8% on 1 June 2026). This happens even if you earned nothing all year, so a long stretch of leave can meaningfully increase your balance.
Can I pause or defer my HELP debt during parental leave?
There is no formal pause or deferral mechanism for HELP debts. The system self-adjusts: below the $67,000 threshold there’s no compulsory repayment, and above it the marginal rates scale with income. Indexation, however, cannot be paused.
Should I make voluntary HECS repayments before going on leave?
A voluntary payment before 1 June reduces the balance that indexation is calculated on, which is the main mathematical benefit. Just remember voluntary repayments are never refundable and don’t reduce any compulsory repayment you’ll owe — so weigh it against keeping a cash buffer for the baby.
What happens to the HELP withholding my employer took from my pay?
If your employer withheld extra PAYG for HELP from your salary before leave but your final repayment income ends up below $67,000, the withheld amount is refunded to you when you lodge your tax return. No action needed beyond lodging.
Plan your leave year with the HECS calculator
Parental leave doesn’t have to mean nasty surprises at tax time. The winning formula is simple: estimate your total repayment income for the year, check it against the $67,000 threshold, fix your PPL withholding rate if needed, and make a decision about indexation before 1 June.
Run your own numbers in seconds with our free HECS/HELP repayment calculator — plug in your expected salary, PPL and any employer-paid leave to see exactly what (if anything) you’ll owe. Pair it with the income tax calculator to check your overall take-home for the leave year.
This article is general information only and is not financial advice. HELP rules and PPL rates change — always confirm current figures with the ATO and Services Australia before making decisions.