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Make sure you're paying enough towards your student loan

February 25, 2015

If you have a student loan and you receive income from salary or wages, NZ Super, a Veteran's Pension, student allowance or income-tested benefit, there are things you need to know to ensure you pay the right amount towards your student loan.

If you work for salary or wages: You need to use a tax code with the "SL" repayment code (unless you have a special tax code or a repayment deduction exemption). This ensures your employer deducts the correct amount of student loan each time you get paid.

For your main source of income (the job you earn the most money from), use the "M" tax code with the "SL" repayment code.

For your secondary income (income from any other job where you earn less than your main source of income), use one of the "S" tax code (SB, S, SH or ST) with the "SL" repayment code.

If you start a new job or you need to change you tax code, fill in a Tax code declaration (IR330)form and give this to your employer for their records.

If you receive NZ Super/Veteran's Pension or student allowance payments: The Ministry of Social Development (MSD) will update your tax code to include the "SL" repayment code, once you have supplied them with a completed Tax code declaration (IR330)form or we advise them to. They'll deduct student allowance payments when you earn over the pay-period repayment threshold. The amount to be deducted will depend on whether the NZ Super/Veteran's Pension or student allowance is your main or secondary income.

If you receive an income-tested benefit: Work and Income automatically uses the "M" tax code. You can't use the "SL" repayment code for your income-tested benefit, so student loan deductions won't be taken out of your benefit payments. For any other income you earn while you're receiving an income-tested benefit, you must use on of the "S" tax codes (SB, S, SH or ST) and add the "SL" repayment code.

If you stop receiving an income-tested benefit and start working, you'll need to use the "M" tax code with the "SL" repayment code for your main source of income. Make sure you fill in a Tax code declaration (IR330) form and give this to your employer for their records.

Significant under-deductions: If you haven't had the right amount of student loan repayments deducted from your salary or wages or payments from MSD, you may end up with significant under-deductions on your student loan. In this case, we'll send you a "Student loan compulsory extra deduction notice", which lets you know we've asked your employer to make compulsory extra deductions from your pay.

This also applies to current students who are receiving student allowance payments from StudyLink, as this is considered income.

Compulsory extra deductions are made on top of your standard student loan deductions each pay period. These extra deductions will only be made in the pay periods you make a student loan deduction (when you earn over the pay-period repayment threshold) and will continue until we recover the underpaid amount.

Apply for a special deduction rate if you have two or more jobs: NIf you have more than one job and you're earning less than the pay-period threshold from your main job (eg, $367 if you're paid weekly) you can apply for a special deduction rate.

This means the student loan deductions from your secondary earnings will be deducted at a reduced rate.

You can apply for the quarterly special deduction rate through your myIR Secure Online Services account. If your applications is successful, you'll be able to download a special deduction rate certificate. Give this to your employer so they can deduct your student loan repayments at the rate shown on your certificate.

Apply for a repayment deduction exemption: You can apply for a repayment deduction exemption if you're a full-time student working in New Zealand and you expect to earn less than the annual repayment threshold ($19,084). You don't have to use the "SL" repayment code while you have the exemption.

You can apply for a repayment deduction exemption through your myIR Secure Online Services account. If you're application is successful, the exemption is valid for a year.

You must give your employer the repayment deduction exemption certificate so they don't deduct any student loan repayments from your pay.

The exemption applies for the period you meet the criteria, for up to one tax year (1 April to 31 March). It covers the time between semesters, including the tax break, as long as you're continuing your study programme in the next semester. If you're going to continue study in the next tax year, you'll need to reapply for the exemption if you continue to meet these conditions.

Changes to employee allowances

Effective 1 April 2015, there are changes to the tax treatment of allowances that you might provide your employees. Allowances are payments made to an employee in addition to their salary or wage and can include payments for accommodation, food or clothing.

The changes clarify the tax treatment of employer-provided accommodation, accommodation payments and other allowances or payments made by employers to cover employee expenditure.

Find out more about benefit allowances (accommodation, meals or clothing)