Published on 27 Aug 2026
ATO HECS and payroll setup should be checked before an employee’s first pay run because incorrect study loan information can affect how much tax is withheld from their pay. Employers should make sure employee declarations and payroll settings for Study and Training Support Loans (STSL) withholding are recorded correctly before processing wages. This matters when an employee has a Higher Education Loan Program (HELP) loan, sometimes still referred to as a HECS debt, or another eligible study or training loan. The Australian Taxation Office (ATO) uses the tax system to calculate compulsory repayments based on repayment income, while employers withhold applicable STSL amounts through payroll.
What Should Employers Check for ATO HECS Before the First Pay Run?
Employers should begin by checking the employee’s Tax File Number (TFN) declaration, including whether they have advised that they have a HELP or another study and training support loan. An existing employee can update this information using a Withholding declaration. If an employee advises that they have an applicable loan, the payroll system may need to calculate an additional STSL withholding component as part of the Pay as You Go (PAYG) withholding from their pay. You do not need to check the employee’s loan balance, access their study loan account or calculate how much they owe overall. Your role is to record the employee’s declaration correctly and make sure the payroll system applies the current ATO withholding settings for each pay cycle.
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Accurate Payroll Setup Helps Prevent Repayment Errors
A small setup mistake can affect the amounts withheld from every pay cycle. If an employee has advised that they have a study or training loan, but the payroll system is set up incorrectly, their PAYG withholding may not include the correct STSL withholding component. The STSL amount withheld through payroll is based on the employee’s earnings for the relevant pay period and the current ATO withholding rules, rather than the outstanding balance of their loan account. Employers should not try to estimate the employee’s debt, loan balance, indexation, refund position or final compulsory repayment because those matters are dealt with through the employee’s income tax return and assessment.
Example: An employee starts a new job and advises that they have a HELP loan. If that information is entered incorrectly in payroll, the PAYG withholding during the year may be lower than required, which could leave the employee with an amount to pay when their tax return is assessed.
How Do Study and Training Loan Repayments Work Through Payroll?
When an employee has an applicable study and training support loan, additional STSL withholding may apply based on their earnings for the relevant pay period. The amount is calculated using the employee’s pay and the current ATO withholding rules. The amount withheld through payroll does not mean the employee’s exact loan balance is reduced after every pay cycle. The ATO calculates any compulsory repayment when the employee’s tax return is assessed, based on their repayment income and the rules for that income year, while amounts withheld through payroll form part of their PAYG withholding.
Example: An employee may earn more during one pay cycle because they work additional hours or receive a bonus. Their PAYG and STSL withholding may change, with bonuses and certain other additional payments subject to the relevant ATO withholding rules.
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Employers Do Not Need to Manage the Employee’s Loan Account
An employer does not need access to an employee’s ATO online services, nominated bank account, loan account or education records. Employers are responsible for payroll withholding based on the information provided by the employee, rather than managing the underlying Commonwealth debt. Employees can use ATO online services to check their HELP loan balance, review their study and training loan information and see how repayments or adjustments have affected their account. If an employee believes their balance, assessment or compulsory repayment is wrong, they should contact the ATO or seek appropriate tax advice. If they have repaid their study or training loan in full, they should provide their employer with a new Withholding declaration so the additional withholding can stop.
How ACT Bookkeeping Can Help with Payroll And ATO-Ready Records
We can help you set up employee payroll records, review the information entered into your bookkeeping software and keep payroll records organised for each pay cycle. We also support businesses with STP reporting, Pay as You Go Withholding (PAYGW), payroll processes and ATO-ready bookkeeping records. If you are employing someone new or want to check your current payroll setup, book a meeting with ACT Bookkeeping before your next pay run. We can help you maintain accurate payroll information, timely bookkeeping and practical compliance processes without adding unnecessary complexity to your day.
