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Tax lawyer fights for ATO ‘loophole’ to slash your HECS debt

Harrison Dell said Australia’s tax law is very vague on a specific section and that could be exploited if the stars align.

A tax lawyer has found a possible loophole that could reduce his HECS debt by thousands of dollars.

Many Australians are struggling to cope with the incredible amount of student loan debt they have accumulated, especially after the indexation rate was increased to more than 7 per cent last year. Some have amassed six-figure debts during their studies and subsequent indexation and feel like they will never be able to pay it off.

However, Cadena Legal’s principal solicitor Harrison Dell told Yahoo Finance that Australia’s tax law is fairly vague when it comes to the wording around your payments and this could be an “unexpected” and “unintended” solution to your debts.

Harrison Dell next to a student with HECS debt
Harrison Dell has found an 'unexpected' and untested part of Australia's tax law that could affect many with HECS debt. (Source: TikTok/Getty)

How can I reduce my HECS debt?

While Aussies aren’t charged interest on their HECS debt, the remaining balance is subject to indexation, which increases the amount in line with inflation each year.


The indexation rate has been fairly low in recent years, sitting around 1 to 1.5 per cent, however it skyrocketed in 2023, which meant people with HECS debt suddenly had to pay a lot more money to get that debt to zero.


Dell said while the Australian Taxation Office (ATO) calls it indexation, it’s effectively “interest” in the tax lawyer’s eyes. Using his own example of his law degree, which cost him $30,000, Dell said the indexation on his HECS debt, which has now ballooned out to $72,000, should be tax deductible.

“The law isn't written in a way which says that the indexation isn’t tax deductible,” he told Yahoo Finance. “It just says any payment that you make isn't taxable. But the indexation itself is a cost I'm incurring every single year and it's got a connection to my income.

“That argument’s been hanging around a little bit, but no one's ever pushed it.”

The indexation on his HECS debt last year alone was $4,500 and if he was able to make that tax deductible at a marginal rate of 37 per cent, he would be entitled a little bit over $1,000 back from the ATO.

But if he was to apply that retrospectively over all the years he’s been paying off his HECS debt, Dell reckons he could get between $15,000 to $20,000 worth of deductions.

Can I use this tax claim for my HECS debt?

Dell doesn’t think the ATO will agree with his proposal, but he’s prepared to take the matter to the Administrative Appeals Tribunal (AAT), where precedent is made. If the AAT did rule in his favour, he suspects the government would intervene and set up legislation to block it.

Many have told him the fight won’t work, but he thinks it’s worth it.

“People assume [tax law] works a certain way,” he said. “But when you actually pull out the book and go, ‘How does it work?’ It doesn't really work that way.

“And it's only when it gets to a sort of powder keg, like this, where someone is actually determined enough to go and see how it really works.”

Don’t hold your breath though, as Dell said his submission to the AAT could take up to 12 months before any type of decision is made.

The lawyer said it’s too early to make this type of claim and urged people should “wait and see” before making submissions themselves at tax time later this year.

The fight to make it easier to pay off HECS debt

Victorian independent MP Dr Monique Ryan recently launched a petition to make paying off HECS debt easier after being confronted by so many stories of Aussies struggling with their student loans.

It has already attracted more than 233,000 signatures and it calls on Education Minister Jason Clare to address the way HECS is indexed.

"Last year, over a million Australians saw their HECS debt grow faster than it was being repaid because of an unfair indexation system," Dr Ryan wrote on the campaign.

"The government got more money last year from our HECS debts than it did from its main fossil fuel tax.

"We should celebrate students going to university, not straddle them with a lifetime of debt.

"Young people are facing a housing crisis, a cost-of-living crisis, and a climate crisis – they shouldn't be facing a HECS debt crisis as well."

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