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STSL tax is the amount you withhold from an employee’s pay to repay their study and training support loans. As an employer, you are obligated to deduct STSL repayments once the employee’s repayment income exceeds the minimum repayment threshold.
What is STSL tax?
STSL stands for study and training support loans. It’s an umbrella term for various education and training loans collected through the income tax system.
Back in 2019, the ATO consolidated all study and training loans under the STSL label. Like PAYG, STSL is collected through the payroll system. You withhold compulsory repayments from the employee’s pay when their income surpasses the repayment threshold.
What loans are included in STSL?
STSL covers every government study and training loan. The main study and training loans included are:
- Higher Education Loan Program (HELP): Includes HECS-HELP, which assists university students with tuition fees.
- VET Student Loans (VSL): For students undertaking diploma-level and above vocational education and training.
- Student Financial Supplement Scheme (SFSS): While the financial supplement scheme SFSS is closed to new loans, existing loan repayments still apply through the tax system.
- Student Start-up Loan (SSL): The student start-up loan gives financial support to higher education students receiving Youth Allowance or Austudy. Includes the ABSTUDY student start-up scholarship loan.
- Australian Apprenticeship Support Loan (AASL): Formerly the Trade Support Loan (TSL), it provides apprentices with up to $27,048 (for 2026–27) for living costs, with a reduction upon successful completion.
Bear in mind that all loans under the STSL umbrella, including full fee-paying students’ VET student loans and training support loans, have compulsory repayments once your income exceeds the threshold.
When do STSL repayments start?
STSL repayments begin when an employee’s repayment income is higher than the minimum repayment threshold, which is currently $69,528 (2026–27).
Annual repayment income includes taxable income, reportable fringe benefits, reportable super contributions, net rental losses, and total net investment loss.
Exempt foreign income and exempt foreign employment income don’t count; only foreign employment income with no exempt status is included in worldwide income for repayment purposes.
How much STSL do you withhold?
For 2026–27, STSL repayments use marginal rates instead of a flat percentage. With the new marginal system, repayments are calculated only on the income above $69,528.
| Repayment income | Repayment rate |
|---|---|
| $69,529 – $129,717 | 15 cents for each dollar over $69,528 |
| $129,718 – $186,050 | $9,028 plus 17c for each $1 over $129,717 |
| $186,051 and over | 10% of your total repayment income |
The repayment amount is calculated using marginal rates based on income above the threshold. Your payroll software uses the ATO’s repayment income method and tax tables to determine the right STSL repayments for each pay run.
How does the pay run calculation work?
STSL pay run calculations work by estimating annual repayment income from the employee’s pay run earnings. Your software should multiply the gross earnings paid in each period by the applicable pay frequency — weekly, fortnightly, or a monthly pay schedule.
Using this method estimates the employee’s annual repayment income from the employee’s earnings, then applies the marginal rate. The result is a tax free payment added to PAYG, with no separate line for the employee.
The repayment income calculation method also factors in the employee’s taxable income, reportable employer super contributions, and any potential STSL debt incurred.
If an employee has several pre-tax deductions — such as a salary sacrifice super deduction — they lower the employee’s taxable earnings before the STSL amount is calculated. Lump sum payments and recurring additional tax deductions can change how much tax is withheld.
What are your responsibilities as an employer?
Employers have to withhold STSL payments from an employee’s pay if their income is above the threshold, which makes accurate withholding a must for payroll compliance.
Employees also have to inform you of any STSL debt during onboarding via their tax file number (TFN) declaration. If an employee has an STSL debt and earns above the salary threshold, you must withhold extra tax to cover the repayment.
If an employee has multiple employers, only the main employer deducts STSL repayments based on the highest income. If an employee repays their STSL loan in full, they have to tell you to stop making further deductions from their pay.
How do you report STSL repayments?
Report STSL amounts through STP along with your regular PAYG withholding. The ATO prescribes formulas for calculating PAYG and STSL amounts in payroll systems.
Moreover, you should always keep your payroll software updated with the latest ATO tax tables for the most accurate STSL calculations.
Stay across ATO schedules and payment deadlines to avoid penalties for late or incorrect withholding. You can also learn more about STP Phase 2 reporting here.
How is STSL reconciled at tax time?
The ATO reconciles total repayment income when the employee lodges their tax return. It refunds any over-withholding or bills any shortfall against the employee’s STSL debt.
Employees can make voluntary repayments at any time to cut down their loan balance faster.
Importantly, STSL repayments are not tax-deductible, as they are repayments of a debt instead of a tax expense. Financial institutions also consider STSL debts during home loan applications, since they reduce a borrower’s disposable income — so that’s worth keeping in mind.
Where can you get STSL advice?
Always refer to the ATO for the most current thresholds and rates. The repayment thresholds and rates can — and usually do — change every financial year.
And if you’re dealing with complicated pay runs with salary sacrifice arrangements, super salary sacrifice deductions or multiple pre-tax deductions, speak to a bookkeeper, accountant or tax professional.
Solid payroll tax compliance will protect both you and your employees from incorrect STSL calculations.
