We wanted to bring to your attention some important changes regarding student and training loan indexation that have just passed through Parliament.

The law is changing how the indexation on student loans is calculated. In the past, indexation has been based solely on the Consumer Price Index (CPI). However, moving forward, the indexation rate will be based on the lower of either the CPI or the Wage Price Index (WPI).

This new rule will be backdated to 1 June 2023, which means it will affect loans from that date onward. Here’s how the updated indexation rates break down:

3.2% for 1 June 2023 (reduced from 7.1%)

4% for 1 June 2024 (reduced from 4.7%).

Impact on Your Loan

If your loan has been over-indexed in the past two years, you may be entitled to a refund. The Australian Taxation Office (ATO) will automatically adjust your account to reflect the new, lower rates and will process refunds for any excess amounts already paid.

This means:

If after the adjustment, your account is showing a credit (i.e., you've paid more than required), this excess will be refunded to your nominated bank account provided you have no outstanding tax or other Commonwealth debts.

If your loan is in credit after the adjustment, any remaining funds may be transferred to offset your income tax account (if applicable), and the remainder will be refunded to you.

What You Need to Do

For most clients, there’s nothing you need to do at this stage. The ATO will automatically recredit excess amounts to your account once the legislation receives Royal Assent, and this process will begin soon after.

You should expect to see these credits applied to your account by the end of January 2025. However, in some cases, due to the complexity of individual accounts, it might take a bit longer.

Unfortunately, the ATO cannot provide a list of exactly which clients will receive refunds, as they will only know once all recredits are processed.

We drew inspiration to write this article from the ATO