STSL tax: what it is and how it works (2026–27 guide)

Somewhere in your payroll there's a tick box that says "has a study or training loan." Tick it and an extra chunk comes out of that employee's pay every cycle. That's STSL tax, and for most payroll teams it's the tax they think about least, right up until someone changes jobs, pays off their uni debt, or asks why their fortnightly pay dropped in July.

The threshold moved again on 1 July 2026, the rules for second jobs and termination payments aren't what most people assume, and Payday Super now puts every pay run in front of the Australian Taxation Office (ATO) within days. Here's what's changed, what you're on the hook for, and what you're not.

What is STSL tax?

Study and Training Support Loans (STSL) is the ATO's umbrella term for HECS-HELP and every other government study and training loan. "STSL tax" is the extra amount you withhold from an employee's pay to cover their compulsory repayment.

STSL isn't its own tax. It's a top-up on PAYG withholding: an extra slice you take out of the same pay, report on the same Single Touch Payroll (STP) file, and send to the ATO with the same payment. You're the collection agent. The ATO is the accountant. The employee is the one who finds out at tax time whether the two of you got it right.

Three people are involved, and each has one job:

• The employee tells you they have a loan, on their Tax file number (TFN) declaration when they start or a Withholding declaration later.

• You withhold the STSL component each pay run, report it through STP, and pay it with your PAYG withholding.

• The ATO works out the real repayment when the employee lodges their tax return and applies what you've withheld against it.

So you never calculate the final repayment, and nothing you withhold touches the loan balance directly. It sits as a credit until the return is assessed. Withheld too much, the ATO refunds the employee. Too little, the employee gets a bill. Either way, the fix happens at tax time, not in your payroll.

Which loans fall under STSL

One set of thresholds and rates covers every study and training loan. If an employee has more than one, a single repayment covers the lot and the ATO applies it in a set order. The loans you'll see on a TFN declaration are:

• Higher Education Loan Program (HELP): HECS-HELP (Higher Education Contribution Scheme), FEE-HELP, SA-HELP, and OS-HELP. This is the one most employees have.

• VET Student Loans (VSL): For diploma-level and above vocational courses.

• Australian Apprenticeship Support Loan (AASL): Formerly the Trade Support Loan (TSL). It was renamed in 2024, so older payroll records may still show the old name.

• Student Start-up Loan (SSL) and ABSTUDY SSL: Voluntary loans for students on Youth Allowance, Austudy, or ABSTUDY.

• Student Financial Supplement Scheme (SFSS): Closed to new loans since 2004, but existing balances are still collected through the tax system.

There were also two changes in 2025 that affected your employees' balances, even though they don't change what you withhold. The government cut every outstanding balance by 20% as at 1 June 2025, and indexation now uses the lower of CPI and the Wage Price Index. So expect questions from employees about why their balance dropped, and point them to the ATO rather than trying to explain it from payroll. It's their loan, not your ledger.

2026–27 repayment thresholds and rates

The repayment system changed on 1 July 2025 from a flat percentage of total income to marginal rates, where only the income above the threshold attracts a repayment. The thresholds were then indexed on 1 July 2026. For the current financial year:

Source: ATO, Study and training loan repayment thresholds and rates.

The minimum threshold was $67,000 in 2025–26, so anyone you were withholding from at the bottom of the band last year may now sit under it.

"Repayment income" is wider than salary. The ATO adds up taxable income, reportable fringe benefits, reportable super contributions, total net investment loss, and exempt foreign employment income. You don't need to track any of that, though. Your withholding is based only on the earnings you pay, using the ATO's tax tables. The rest is the ATO's problem at tax time.

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Your obligations as an employer

Your job is three things: withhold the right amount, report it, and pay it on time. The bits that catch people out are the exceptions.

What you withhold on

You withhold STSL from all of the employee's earnings, including taxable allowances, bonuses, and commissions. Two exclusions apply:

• Lump sum termination payments: No STSL on these, even for an employee with a loan.

• No TFN provided: You withhold at the top rate and don't apply an STSL component at all.

Both are easy to get wrong in a manual system. The termination one in particular tends to surface as an angry email from a departed employee.

How you report and pay

STSL goes through STP as part of PAYG withholding. There's no separate line and no separate lodgement. Payment deadlines follow your PAYG withholder category:

• Small withholders ($25,000 or less a year) pay quarterly, 28 days after the end of each quarter.

• Medium withholders ($25,001 to $1 million a year) pay monthly, by the 21st of the following month.

• Large withholders (more than $1 million a year) pay electronically within six to eight days of each payday, on the ATO's large withholder schedule.

Late or short withholding attracts penalties and interest. Fail to withhold at all and you can lose the tax deduction for the wages unless you make a voluntary disclosure to the ATO.

How to process STSL deductions in payroll

1. Collect the declaration

Every new hire fills in a TFN declaration, and one of the questions is whether they have a study or training loan. A yes is what starts the withholding. Existing employees who take out a loan later, or pay one off, update you with a Withholding declaration.

Get the answer into the payroll record before the first pay, not after. If you onboard digitally, put the declaration in the onboarding checklist so nobody can skip it.

2. Set up the right scale in payroll

The ATO's Schedule 8 formulas bolt an STSL component onto the standard withholding scales. So you need one scale for employees with a loan and another for employees without, even if everything else about their tax position is identical. Most payroll software handles this with a tick box on the employee record. If you run payroll on spreadsheets, you're maintaining both scales by hand, and that's where errors creep in.

3. Apply the current tables each pay run

Use the ATO's Schedule 8 tax tables for weekly, fortnightly, or monthly pays, or its online withholding calculator. The tables were updated on 1 July 2026 for the new thresholds. Payroll software should pick that up automatically, but check the first pay run of the year for anyone sitting near $69,528, since that's where a stale table shows up first.

4. Report through STP

STSL amounts flow through STP with the employee's PAYG withholding on every pay event. Nothing to separate out. If you spot a mistake, fix it in the next regular pay event within the same financial year rather than waiting for year-end.

5. Pay on your PAYG deadline

Pay what you've withheld on the schedule for your withholder category. It's not your money in the meantime, and director penalties can apply if it goes unpaid.

6. Finalise by 14 July

Your STP finalisation declaration tells the ATO your year's reporting, including STSL, is complete. The deadline is 14 July unless the ATO has given you longer. Miss it and you delay your employees' income statements, which delays their tax returns, which delays the ATO applying any of that withholding to their loan. They'll notice.

Worked example

Say an employee earns $80,000, has a HELP debt, is paid fortnightly, and claims the tax-free threshold.

Their income over the threshold is $80,000 minus $69,528, which is $10,472. At 15c in the dollar, the annual repayment is $1,570.80. Across 26 fortnights, that's roughly $60.42 a pay.

In practice, your payroll applies the Schedule 8 fortnightly table to each pay's gross earnings rather than dividing an annual figure, so the payslip will differ slightly. So treat the annualised number as a sanity check, not the amount you withhold.

When an employee pays off their loan

The employee has to tell you. They do it with a Withholding declaration, and the moment you have it, update their record and stop applying the STSL scale from the next pay.

If you keep withholding after they've told you, the fix depends on timing:

• Same financial year: Correct their year-to-date figures in your next STP pay event and refund the over-withheld amount through payroll.

• Previous financial year: You can't touch prior-year withholding. The employee gets the excess back as a credit when they lodge.

And if they never tell you, the ATO refunds them at tax time. That's not on you, but it's worth nudging employees to update their declaration whenever their circumstances change. A quick "paid off your HECS? Tell payroll" in the July all-hands saves everyone a phone call.

Why STSL accuracy matters more under Payday Super

From 1 July 2026, Payday Super requires super contributions to land in the employee's fund within seven business days of each payday. That doesn't change STSL itself. What it changes is how visible your payroll is to the ATO.

A wrong STSL scale used to be a once-a-year problem. Someone's tax return came in odd, they rang payroll, you fixed it. Now every pay run lands at the ATO within days, with PAYG, STSL, and super sitting side by side, and a pattern of errors is a pattern the ATO can see. That's not a reason to panic, but it is a reason to check the tick box.

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STSL tax FAQs

What happens if an employee has more than one job?

Every employer they've said "yes" to withholds STSL. Schedule 8 has a scale for employees who haven't claimed the tax-free threshold, which is the usual setup for a second job, so you still apply the STSL component even if you're not their main employer. The ATO reconciles it all at tax time, and if the employee has overpaid, they get it back.

Does exempt foreign employment income affect STSL?

Yes, for the employee. The ATO counts exempt foreign employment income in repayment income, so it can tip someone over the threshold or into a higher band even though it isn't taxed here. Nothing changes on your side. You withhold on what you pay, and the ATO sorts out the rest.

Do I withhold STSL from contractors?

No. STSL withholding applies to payments to employees. Contractors with a study loan repay through their own tax return or PAYG instalments. If you're not sure whether someone is an employee or a contractor, settle that first. How you pay contractors in Australia walks through it.

Is the Student Financial Supplement Scheme still open?

No. SFSS closed to new loans on 1 January 2004. Anyone with an SFSS balance still repays it through the tax system at the same thresholds and rates as every other STSL loan, so in payroll you treat it exactly like a HELP debt.

Simplify STSL tax with Rippling

The threshold moves every July. Employees change jobs, pay off loans, and forget to tell you. And the same declaration answer has to land correctly in payroll, STP, and now Payday Super, every single pay run.

Rippling Payroll runs on one employee record. The study loan answer someone gives during digital onboarding is the same record payroll uses to pick the Schedule 8 scale, the same record STP reports from, and the same record Payday Super draws on for qualifying earnings. So there's no re-keying between an HR system and a payroll system, which is where most STSL errors start. Tax tables update at the start of each financial year, and a Withholding declaration change flows through to the next pay run without anyone overriding anything.

If you're still reconciling payroll against a separate HR system, the guide to switching payroll providers covers how to migrate mid-year without breaking STP.

See how Rippling handles STSL, STP, and Payday Super in one pay run.