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Former students caught out by HECS index and complex rules


Accountants say first home buyers and those living overseas are struggling to manage their obligations.

By Christine Chen 10 minute read

HECS debt-holders aspiring to buy a home or work overseas have been caught out by the scheme’s complexity and left in the dark by poor communication, according to tax experts.

HLB Mann Judd tax director Bill Nussbaum said an increasing number of clients were wrestling with how to manage their HECS debts after failing to allow for indexation or rising mortgage rates, while many overseas were simply unaware they were still on the hook for repayments.

Mr Nussbaum called the issue a “sleeping giant” because “a lot of people just aren’t aware of the actual rules.” 

Every June HECS loans are adjusted for inflation, which raised outstanding debts this year by 7.1 per cent and ballooned the total to $80 billion, or $24,770 per student.

He said the surge in HECS debt had impacted mortgage applications, hampering the prospects of first home buyers. 

“For young people applying for a home loan, their HECS debt can count against them,” he said.

Assistant tax manager Rachel Freeman had firsthand experience of simultaneously managing a HECS debt and a home loan. 

“I recently bought a house so I’m a bit wounded – my loan is half variable, so I've been kind of combating that as well,” she said.

“Looking at my repayments versus the indexing, about half of it is knocked out by the indexing, so that is a bit frustrating to see.”

For HECS debt-holders living overseas, Ms Freeman said many were unaware of an obligation to declare their worldwide income and make repayments after a previous loophole was closed in 2017.

Overseas graduates owe over $1 billion in HECS loans with indexation adding a further $70 million and with many moving overseas post-COVID-19, the issue had come to the fore again. 

“People are starting to work overseas again and whether they're aware or not, their loans are still being indexed and ticking away,” she said. 

“Even though they don't have any other Australian income, like they have to lodge the tax return for the purposes of the HECS.”

Ms Freeman said if she had anticipated the impact of indexing on her HECS balance, she would have acted differently.

“I probably would have repaid some of the debt, at least to a level where my repayments aren’t getting counteracted by the indexing and the indexing is happening each year.”

She also would have considered asking her parents for help with HECS repayments.

“I would consider asking my mum if she would be interested in entering some kind of financing arrangement where I pay her a little bit more on top.”

But Mr Nussbaum said “a lot of parents just don't understand the HECS system”.

“Parents need to be informed because they may be in a position to help to reduce the loan for their children … parents might think they would prefer their children owe them money rather than the government,” he said.


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Christine Chen

Christine Chen


Christine Chen is a graduate journalist at Accountants Daily and Accounting Times, the leading sources of news, insight, and educational content for professionals in the accounting sector.

Previously, Christine has written for City Hub, the South Sydney Herald and Honi Soit. She has also produced online content for LegalVision and completed internships at EY and Deloitte.

Christine has a commerce degree from the University of Western Australia and is studying a Juris Doctor degree at the University of Sydney. 

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