What is a voluntary repayment?
A voluntary repayment is any payment you make towards your HECS-HELP debt on top of the compulsory repayments that come out of your pay. There's no minimum or maximum, and you can pay at any time of year, whether or not you earn above the repayment threshold. Many people use them to clear their debt faster and shrink the balance that indexation hits on 1 June.
Compulsory repayments are set by your income; voluntary payments are your choice. One lump sum or several smaller payments — every dollar goes straight off the loan.
How to make a voluntary repayment
The easiest way is through myGov. Sign in to ATO online services, open your study and training loans account, and you'll find your payment reference number (PRN). You need that number to pay by BPAY, credit card or direct credit, the ATO's preferred methods.
Electronic payments can take up to four business days, so don't leave it to the last minute. Some people salary-package repayments through their employer, but that can create fringe benefits tax issues — get advice first.
The best time to pay: before 1 June
Indexation is applied to your debt on 1 June every year. If you pay $2,000 before that date, indexation is calculated on a balance $2,000 lower — a saving that compounds over the life of the loan.
Second deadline: if you plan to wipe out the whole debt, do it before you lodge your tax return. If the repayment is credited before you lodge, no compulsory repayment is included on your notice of assessment. Lodge first and a compulsory repayment can land on your notice of assessment even though the debt is gone.
What happened to the voluntary repayment bonus?
Between 2005 and the end of 2016, the government offered a bonus on voluntary repayments: 10% for payments of $500 or more, and 5% for smaller amounts. That bonus was abolished on 1 January 2017 and hasn't returned — any advice that still mentions a HECS voluntary repayment bonus is out of date.
Voluntary repayments aren't tax deductible either, so the benefit comes from avoiding indexation rather than from a tax break.
FAQ
Q: Does making a voluntary repayment lower my compulsory repayment for the year? A: Not directly — it's worked out from your repayment income, not your remaining debt. But if voluntary repayments clear the whole debt before you lodge your tax return, the compulsory repayment is waived.