Student Loan Repayments
Inland Revenue requires that, when applicable, employers withhold student loan repayments from employee earnings. Standard tax calculation programs calculate the repayment amount using the standard repayment rate that is defined by Inland Revenue. This standard student loan repayment rate is used for all employees that have one of these tax scales, and also have a student loan:
M
S
SH
SD
MD
ST
STC
When an employee has a student loan with Inland Revenue, the employee receives a student loan certificate. You must track the employee's certificate number. You can use a text media object to attach the certificate number to the employee.
In addition to calculating student loan repayments at the standard rate, the Inland Revenue Service Income Tax Act of 2004 requires that employers support the ability to withhold amounts in addition to the standard student repayment rate, or to calculate the repayment amount at a different rate. This enables employees to repay their student loan in a more rapid fashion, or to appeal to Inland Revenue for a lower rate.
When setting up additional repayment contributions, you can use one of these methods:
Specify a nonstandard percentage rate to calculate for the year.
For example, an employee might choose to withhold an additional 5% of earnings for student loan repayment. Assuming that the standard percentage rate is 10%, you enter 15 in the Percent field on the New Zealand Employee Tax ID Number form. You can also use this method to enter a percentage that is below the standard rate if Inland Revenue accepts the employee's appeal for a lower rate.
Calculate an additional flat amount over the standard repayment rate.
For example, an employee might choose to repay 50 NZD in addition to the standard repayment amount. The system calculates the standard repayment amount and then adds to that amount the additional flat amount. The total amount is then deducted from the employee's pay for the student loan repayment. Therefore, if the standard rate is 10%, the employee would pay 10% of their earnings, plus 50 NZD toward their student loan.
Specify a flat amount to be withheld for the entire year.
The employee can specify a flat amount to be withheld for the year. The amount is prorated over the number of pay periods in that year and deducted as a flat amount. For example, if the employee will repay 3600 NZD over the course of the year, and there are 24 pay periods in the year, the employee repays 150 NZD per pay period.
When you enter student loan repayment overrides using any of these methods, you must specify the beginning and ending date of the override. For example, if Inland Revenue grants an employee a lower student loan repayment rate, that rate is typically effective for only one tax year. The employee must then reapply for a lower rate. Using effective dating, you can set up the override record to stop calculating at the end of the tax year. The system then calculates the student loan repayment amount at the standard rate.