Student Loan Scheme (Exemptions and miscellaneous provisions) Amendment Act 2010: Increased deduction rate

Increased deduction rate

Sections 19 and 20A of the Student Loan Scheme Act 1992

The amount that may be deducted from the salary and wages of borrowers who have not met their student loan repayment obligations has been increased from 10 cents in the dollar to up to 15 cents.

Background

Borrowers whose primary income exceeds the repayment threshold are required to advise their employer that repayment deductions should be made. Many borrowers fail to fulfil this obligation, which may result in large end-of-year liabilities. Other borrowers may fail to pay a liability, such as their end-of-year payment, when it falls due.

Key features

Inland Revenue will be able to instruct employers of borrowers who have failed to meet their student loan liabilities when they fell due to make increased deductions of up to 15 cents in the dollar. The higher rate will apply until any shortfall, including any late payment penalties, has been fully repaid. The higher rate may be reduced if payment would cause serious financial hardship.

Application date

The amendments apply from the day after Royal assent - 7 March 2010.

Date published: 11 May 2010

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