Money comes out of every pay, yet each June your balance in myGov goes up. Nothing is broken — the order of events is just unintuitive:
All year: your employer withholds STSL amounts from each pay. Crucially, this money sits with the ATO as tax withholding — it is not applied to your loan yet.
1 June: indexation is applied to your full outstanding balance (2.8% in 2026, the lower of CPI and WPI). Your year of withholding hasn't touched the balance yet.
July–October: you lodge your tax return, the ATO assesses your actual compulsory repayment, and only then is it credited against the loan. Now the balance drops.
So a $30,000 debt gets indexed to $30,840 on 1 June, and your ~$2,300 of repayments only lands weeks later. Across a whole loan this timing costs real money — the ATO applies indexation to a balance your own withholding could have reduced, if the system credited it earlier.
→ See your real debt-free date with the payoff planner — it models this exact order of operations, plus the threshold indexation most calculators ignore.
Paying before 1 June means that amount escapes indexation. At 2.8% indexation, $5,000 paid in May saves $140 of indexation. Whether that beats investing the $5,000 instead depends on your after-tax return — the planner compares both paths.
The one-off 20% reduction (applied automatically to balances as at 1 June 2025) lowered balances, but the timing mechanics above are unchanged.
The marginal system (from 1 July 2025) only charges on income above the threshold — $69,528 in 2026-27. Most people repay less per year than under the old flat-rate system, which also means payoff takes longer if you never pay extra. It's also why most people get a refund this tax time.