Student loan deduction records (New Zealand)
The following topics explain how to set up the Deduction records required for each type of student loan repayment.
If you have employees with student loans, your database must contain a standard student loan deduction to generate the mandatory 12% repayment.
The 'first' student loan deduction in your database must have Deduction class = "S. Student loan reduction" and Sub-class = "Standard". The 'first' deduction is determined by the alphanumeric Code value. Pay processing uses the student loan deduction with the lowest Code value to make the standard 12% repayments. For example, if the database contained student loan deductions with Code = 708, 709 and 710, then processing would use 708.
Alternatively, if the deductions had Code = A708, B708 and C708, then processing would use A708.
Set up the Details (i) tab page with the default values as shown in the following image:
Your database should contain only one standard student loan deduction.
On the Details (ii) tab, accept the default values.
Do not enter the student loan repayment threshold in the Exclude first amount field because it is hard-coded in the "L. Student loan" calculation method.
Set up the Details (iii) tab page with the following values:
| Field | Values | Details |
|---|---|---|
| Calculation method | L. Student loan | Student loan repayment threshold is hard-coded in this calculation method. For employees on a main tax code, processing excludes the employee's first $19,084 (annual) or For employees on a secondary tax code, processing ignores the threshold. |
| Deduction class | S. Student loan reduction | Used by reporting |
| Sub-class | Standard | Basic 12% repayment |
For more information, see Standard Process.
If an employee has not made sufficient student loan repayments in previous years, IRD will tell their employer to deduct additional repayments to recover the shortfall. The employee has to make these commissioner-instigated repayments in addition to their standard 12% repayment.
The catch-up situation is not the same as the arrears payment situation that uses a deduction with Calculation method = "A. Arrears payment".
If any employees have to make commissioner-initiated repayments, then you need to set up a catch-up deduction as a reducing balance loan with Sub-class = "Catch-up (SLCIR)".
- Model the standard deduction to create a catch-up deduction with a unique Code and Description.
On the Details (i) tab, enter Yes in the Reducing balance field.
On the Details (iii) tab, enter the following values:
Field Values Calculation method L. Student loan Deduction class S. Student loan reduction Sub-class Catch-up (SLCIR) 
For more information, see Catch-up Process.
If any employees want to make additional repayments, then you need to set up voluntary deductions with Sub-class = "Voluntary (SLBOR)" for percentage and fixed amounts.
Fixed amount voluntary deductions are much more commonly used than percentage voluntary deductions.
- Model the standard deduction to create a voluntary fixed amount deduction with a unique Code and Description.
On the Details (iii) tab, enter the following values:
Field Values Calculation method F. Fixed amount Deduction class S. Student loan reduction Sub-class Voluntary (SLBOR) 
For process details, see Voluntary Fixed Process.
- Model the standard deduction to create a voluntary percentage deduction with a unique Code and Description.
On the Details (iii) tab, enter the following values:
Field Values Calculation method L. Student loan or P. Percentage of gross If you want the deduction to respect the student loan threshold for employees on a main tax code, use "L. Student loan". Otherwise use "P. Percentage of gross" to deduct the stated percentage of the employee's total gross.
After this deduction is included in a pay do not change the Calculation method because it will cause data integrity issues if an old pay requires auditing or reprocessing in the future.
Deduction class S. Student loan reduction Sub-class Voluntary (SLBOR) 
For process details, see Voluntary Percentage Process.
Special repayment rates only apply to an employee's secondary income for a maximum of 3 months at a time.
A special repayment rate deduction allows you to to override the employee's Standard repayment amount.
Model the standard deduction to create a special rate deduction with a unique Code and Description.
Ensure that the Code value (such as 712) is greater than the Code for the standard deduction (such as 708) because pay processing uses the student loan deduction with the lowest Code value to make the standard 12% repayments.Ensure that the Details (iii) tab contains the following values:
Field Values Calculation method L. Student loan Special rate deductions behave the same way as standard deductions:
- For employees on a main tax code, processing excludes the employee's first $19,084 (annual) or $367 (weekly) of earnings and calculates the repayment on the earnings over the threshold.
- For employees on a secondary tax code, processing ignores the threshold.
Deduction class S. Student loan reduction Sub-class Standard 
For process details, see Special Repayment Rate Process.
When an employee is in arrears for payments such as tax, student loans or family tax credit overpayments, the Inland Revenue Department sends the employer a Section 157 notice. The notice tells the employer to deduct the appropriate payments from the employee's wages and explains how to calculate the required amounts.
If you receive a Section 157 notice, you need to set up an arrears payment deduction.
- Add a deduction with a unique Code and Description.
On the Details (i) tab, enter the following values:
Field Values Type D. Standard deduction Taxable No Reducing balance Yes If Calculation method = "A. Arrears payment", then these Details (i) tab fields must contain the above values or you will not be able to save the Deductions record.
On the Details (ii) tab, enter the following value:
Field Values Direct credit Yes This example shows how to pay electronically. If you opt to make the payment by posting a cheque or at a bank, then set Direct credit to "No" and do not enter bank details. 
On the Details (iii) tab, enter the following values:
Field Values Calculation method A. Arrears payment Bank account 030049-0001100-027 Account name INLAND REVENUE Bank code ARR When you create the Employee Loan record, you can copy across these bank details. See Arrears Payment Process.
For process details, see Arrears Payment Process.