2025 Finance update: Here’s what’s changing for HELP debts, superannuation (Division 296), interest rates, income strategies, and the FHSS scheme—and what it means for you in 2025–26.

HECS/HELP Debt Reduction Bill Introduced

This finance update explains how the 20% reduction and higher thresholds may affect repayments for different income levels. On 23 July, the Labor Government introduced new legislation to deliver on its election promise to ease the burden of student debt.

The Bill proposes three key changes:

1. One-off 20% debt cut – All HELP debts (and some other student loans) incurred up to 1 June 2025 will be reduced by 20%. This reduction will apply automatically, without the need for applications.

2. Higher repayment threshold – The minimum income before compulsory repayments kick in will rise from $54,435 in 2024–25 to $67,000 in 2025–26.

3. Fairer repayment system – Instead of repayments being calculated on total repayment income, the new system will only apply repayments to income above the $67,000 threshold. This means people just crossing the line won’t be hit as hard.

These changes build on reforms already in place that cap loan indexation to the lower of the Consumer Price Index (CPI) or the Wage Price Index (WPI). In simple terms, this ensures student debt will never grow faster than wages.

From 2026–27 onwards, the $67,000 threshold will continue to be indexed each year, but always in line with wages growth at most.

The Government’s stated aim is to make higher education debt more manageable, especially for younger Australians who have seen their HELP balances balloon in recent years due to high indexation.

Will Your Super Be Affected by the $3 Million Balance Tax?

The Government is moving forward with a new measure, known as the Division 296 tax, which will apply an extra 15% tax on part of the “earnings” from superannuation balances above $3 million.

The measure was first announced in 2023 and was due to start in July 2025. It has since been delayed, with the new start date set for 1 July 2026. The Bill has passed the House of Representatives but is still before the Senate, so the final details may yet change.

Who Will Be Affected?

If your total super balance (TSB) across all accounts is:

• Under $3 million – you will not be affected.
• Over $3 million – the new 15% tax will apply to part of your “earnings.”

This tax will be assessed personally by the ATO, not charged directly to your super fund.

How Will “Earnings” Be Calculated?

The key issue is that “earnings” under Division 296 do not just mean the actual income your fund produces. Instead, the calculation also includes unrealised gains such as property value increases, contributions and withdrawals, franking credit refunds, and other adjustments such as insurance payouts. This means you could face a tax bill even if your fund generates little or no cash income.

Key Highlights of the Proposal

The new rules are set to start from 1 July 2026 and will apply to the 2025–26 financial year. One of the more controversial aspects is that pension withdrawals will be added back into the “earnings” calculation, which could increase tax bills for retirees who are simply taking their minimum annual pension. Franking credits on dividends will also be captured, raising the risk of double taxation on investment income. In the case of deceased estates, unused Division 296 credits will be lost when a member dies, while assets may still face capital gains tax, leaving beneficiaries exposed to what many have called a “double sting.” Members of defined benefit pensions will also be affected, although they can defer the payment until retirement, with interest charged on the deferred amount. Another key feature is that the $3 million threshold is not indexed, meaning more Australians are likely to be caught over time as inflation and investment growth push balances higher.

What Should You Do?

If your super balance is close to or above $3 million, now is the time to review your situation. Start by looking at your projected balances to understand whether you are likely to be affected in future. It is also wise to consider liquidity, so that you have access to cash to cover any future tax bills, rather than being forced to sell assets at an inopportune time. Estate planning should also be reviewed, as the changes may increase the tax burden for beneficiaries. Finally, consider how your investment mix—particularly property and other assets that rise in value without producing income—could leave you exposed under the new rules.

Building a Resilient Income Portfolio – Beyond Cash and Bonds

With interest rates falling, savings accounts and term deposits aren’t providing the same returns they once did. Relying only on cash or government bonds can leave your income vulnerable, especially with the rising cost of living. A stronger approach is to build a portfolio that draws income from a mix of different sources.

Here are three areas that are making a real difference for investors:

Alternative Credit

This includes lending outside the big banks, such as corporate loans and project finance. These investments often pay 8–10% compared with just 2–3% from term deposits. Many are secured and pay floating rates, which means income can move up when interest rates rise. They usually require a longer commitment, so they work best for money you don’t need immediate access to.

Real Assets and Inflation Protection

Infrastructure, like utilities and transport networks, often has contracts linked to inflation. Inflation-linked government bonds also adjust their payments as living costs rise. Adding even a small amount of these assets can help protect income in retirement.

Diversified Property

Commercial property funds and listed property trusts usually offer steadier income than residential property. Longer leases, inflation-linked rent increases and tenants in essential services (supermarkets, pharmacies, cafés) all add to income stability. Spreading investments across different sectors and regions further reduces risk.

The takeaway: By blending cash and bonds with alternative credit, real assets and diversified property, you can create a portfolio that delivers reliable income, keeps pace with inflation, and offers more security over the long term.

RBA Cuts Rates to 3.60% – What This Means for Your Business

In August 2025, the Reserve Bank of Australia (RBA) reduced the cash rate by 25 basis points, lowering it from 3.85% to 3.60%. This is the third rate cut in 2025 (following earlier moves in February and May) and signals that the RBA is confident inflation is now under control.

Recent data showed headline inflation at around 2.1%, with underlying (trimmed-mean) inflation easing to 2.7%. These results are within the RBA’s target band and gave the Board room to act. At the same time, the labour market has softened and business confidence remains patchy, pushing the central bank to provide further support to households and businesses.

Why the RBA Cut Rates

The RBA’s decision reflects a balance of easing inflation against slowing growth. The Board highlighted three main factors:

• Inflation stabilising: June quarter CPI confirmed inflation is tracking within target.
• Softening labour market: Signs of weaker employment are emerging.
• Cautious consumers: Household spending remains muted, though there are early signs of recovery.

Minutes from the August meeting indicate that further cuts are likely over the next 12 months, but the pace will be decided meeting by meeting. Markets are currently pricing in another move as early as November 2025, which could take the cash rate to 3.35% by year-end, with a possible glide path towards 3.10% or even 2.85% by mid-2026.

Key Highlights for Business Owners

The August cut offers immediate relief for businesses with variable-rate loans, overdrafts, or finance leases, easing pressure on repayments and freeing up cash flow. Retailers and discretionary sectors may also see gradual improvement as households respond to lower borrowing costs and recent income tax cuts.

However, the RBA has also warned about slowing productivity growth, which could limit longer-term expansion. While demand may pick up, the Board remains cautious and will adjust policy carefully if inflationary risks return.

What This Means for Your Strategy

For now, businesses should see this as an opportunity to strengthen their financial position. Lower rates create space to:

• Review debt structures – consider refinancing at improved terms.
• Optimise cash flow – take advantage of lower repayment pressure to build buffers.
• Plan for demand recovery – discretionary spending may improve into late 2025, particularly in the lead-up to the holiday season.
• Stay flexible – with more cuts possible, strategic timing could help when planning investments or expansion.

Important takeaway: The RBA’s rate cut to 3.60% is a turning point, giving businesses breathing room after years of higher costs. While conditions are improving, uncertainty remains, making this a smart time to tighten cash flow management and prepare for the next phase of rate reductions.

First Home Super Saver (FHSS) Scheme – How It Works

Buying your first home is harder than ever, with prices at record highs. The First Home Super Saver (FHSS) scheme, introduced by the Australian Government, is designed to help first-time buyers save for a deposit using the tax advantages of superannuation.

How it helps

You can make voluntary contributions into your super fund (through salary sacrifice or personal contributions) and later withdraw them to put towards your first home deposit. Because these contributions are taxed at concessional rates and earn interest inside super, you could save more compared to a regular bank account.

• You can contribute up to $15,000 per year and $50,000 in total.
• You can withdraw 100% of after-tax contributions and 85% of pre-tax (concessional) contributions, plus the ATO-calculated interest.
• Contributions from employers or others generally can’t be used.

Eligibility

• You must never have owned property in Australia (unless granted a financial hardship exemption).
• You need to be 18 or older to withdraw savings.
• You must live in the property for at least 6 months within the first 12 months after purchase.
• The scheme can only be used for homes in Australia, not houseboats, motor homes, or vacant land (unless tied to a building contract).

Tax treatment

• Concessional contributions are taxed at 15% when they go into super, which is often lower than your income tax rate.
• When withdrawing, the assessable portion is taxed at your marginal rate, but you receive a 30% tax offset.
• Withdrawals don’t affect HECS/HELP repayments, Medicare Levy Surcharge, or family assistance entitlements.

Application process

1. Apply for a determination (via myGov) to see how much you can withdraw.
2. Request a release of funds (allow 15–20 business days for payment).
3. Notify the ATO within 90 days of signing a property contract.

If you don’t buy within the time limit, you can either recontribute the money to super or pay a 20% FHSS tax.

Things to watch out for

• If your income is higher when withdrawing, you may lose some of the tax benefits.
• Division 293 tax (for very high incomes) reduces savings.
• Withdrawing could reduce your super balance for retirement.
• FHSS withdrawals can affect eligibility for other first home buyer schemes.
• Government debts (e.g., ATO, Centrelink) may be deducted from your withdrawal.

Key takeaway

The FHSS scheme can be a smart way to boost your first home deposit with tax savings and extra interest. But the rules are strict, and timing matters. Make sure you understand the limits and deadlines before you start, so your money doesn’t get locked inside super or reduced by unexpected tax.