Tax codes: Student loan extra deductions
Student loan extra deductions
Your employee can ask you to make voluntary extra student loan deductions on their salary or wage to help repay their student loan faster. We may also require you to make compulsory extra deductions on your employee's salary or wage to catch up on an underpayment that has occurred in their student loan.
Extra deductions are in addition to the amount normally deducted for an employee who uses a student loan repayment code. These must be shown separately to your employee's standard student loan deductions, on your Employer monthly schedule (IR348).
You'll need to use one of the following student repayment codes to identify whether the extra deductions were requested by your employee or by us:
- SLBOR - when your employee asks for voluntary extra deductions
- SLCIR - when we require you to make compulsory extra deductions.
Voluntary extra deductions (repayment code SLBOR)
Your employee may ask you to make voluntary extra deductions for their student loan to help pay their loan off faster.
Voluntary extra deductions are in addition to the standard student loan deductions you must make from their gross earnings, based on your employee's tax code. These extra deductions are made using the SLBOR repayment code.
Your employee can ask you to start or stop making voluntary extra deductions at anytime. You don't need any authorisation from us.
Your employee doesn't have to be earning over the pay period repayment threshold to have extra deductions made from their salary or wage.
Voluntary extra deductions on your employer monthly schedule
The voluntary extra deductions must be listed separately from your employee's other student loan deductions on your Employer monthly schedule (IR348). You'll need to add a new entry for your employee that includes:
- their name
- their IRD number
- SLBOR repayment code, and
- the total amount of extra deductions you've made for the month in the student loan deduction box.
Do not enter any start or finish dates, gross earnings, PAYE, child support, KiwiSaver employee or employer contributions or other student loan deductions.
| Note | |
|---|---|
| Voluntary extra deductions are in addition to any standard student loan deductions you are required to make based on the tax code your employee is using (eg, M SL, S SL etc). | |
Compulsory extra deductions (repayment code SLCIR)
If your employee has not had the right amount of student loan repayments deducted from their salary or wage, we may send you a notice to make compulsory extra deductions.
The notice will tell you the total amount that must be recovered from your employee's salary or wage and the rate the extra deductions are to be made at. You must make the extra deductions until the full amount on the notice has been deducted or until we advise you to stop.
Compulsory extra deductions are on top of the standard student loan deductions you must make based on your employee's tax code (eg, M SL, S SL etc).
Compulsory extra deductions for primary (main) tax codes
If your employee is using a primary (main) tax code (M SL, ME SL or ML SL) and their earnings for a pay period drop below the pay period repayment threshold, then you are not required to make an extra deduction using the SLCIR repayment code for that pay period.
The extra deductions only apply when your employee earns over the pay period repayment threshold.
Compulsory extra deductions for secondary tax codes
If your employee is using a secondary tax code, then the extra deductions apply regardless of the amount earned in a pay period as the pay period repayment threshold only applies to primary (main) job tax codes.
How to calculate a compulsory extra deduction
The extra amount that must be deducted is based on the standard student loan deduction that applies for the pay period. The notice will tell you to deduct and extra amount that will be between 10% and 50% of the standard deduction.
| Examples | |
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Main job earning over the pay period repayment threshold Kim's employer receives a compulsory extra deduction notice from Inland Revenue, requiring them to deduct an extra 30% on top of Kim's standard repayment deduction. Kim's tax code is M SL and her gross pay for the week is $700. Her standard student loan deduction is $33.30. Kim's employer must deduct an additional $9.99 (30% of $33.30). Secondary job Bart's tax code is S SL. His employer receives a compulsory extra deduction notice requiring them to deduct an extra 50% on top of Bart's standard repayment deductions. Bart's gross pay for the week is $290. His standard student loan deduction on the secondary tax code is $29.00. Bart's employer must deduct an additional $14.50 (50% of $29.00) Main job under pay period repayment threshold Manu is using tax code M SL. Her employer receives a compulsory extra deduction notice, requiring an additional 50% be deducted on top of her standard repayment deductions. Manu's pay for the week is $360 which is under the pay period repayment threshold, so her employer does not make a standard student loan deduction. Because no standard deduction has been made, her employer does not make an extra deduction either. |
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| Note | |
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If this is your employee's primary (main) job (tax codes M SL, ME SL or ML SL), the compulsory extra deductions are only required to be made when their gross earnings for the pay period are above the pay period repayment threshold. |
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Compulsory extra deductions on your employer monthly schedule
The compulsory extra deductions must be listed separately from your employee's other student loan deductions on your Employer monthly schedule (IR348). You'll need to add a new entry for your employee that includes:
- their name
- the IRD number
- SLCIR repayment code, and
- the total amount of extra deductions you've made for the month in the student loan deduction box.
Do not enter any start or finish dates, gross earnings, PAYE, child support, KiwiSaver employee or employer contributions or other student loan deductions.
Date published: 31 Jan 2012
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