Understanding New Zealand Student Loan Reporting Changes
Due to recent changes to the New Zealand tax reporting code, employers are now required to track and report separately any commissioner deductions or additional employee contributions made for a student loan.
In order to correctly track and report this information, you must first install the software update that contains the changes, and then run the R8975Z005B table conversion program. Special instructions for running this program are included with the software update.
After running the table conversion, you must then set up tax information for the commissioner deductions and the voluntary additional contributions associated with the student loan. Tax information setup includes:
Adding tax rules SC (commissioner deductions) and SB (voluntary additional contributions) for any New Zealand tax scale that currently includes tax rule SL (student loan). You enter these tax rules up using the Tax Calculation Rules program (P75A0004).
You must also create tax scale records for tax scale SLB (voluntary additional amounts) and tax scale SLC (commissioner deductions). You use the Tax Calculation Parameters program (P75A0001) to enter these records.
You must then set up tax area records for FEDERAL SB and FEDERAL SC. You use the Tax Area Information program (P069012) to enter these records.
After you set up the student loan tax information, you can then enter information for your employees on the New Zealand Employee Tax ID Number form (P75Z0002). The software has been updated to enable you to track overrides, commissioner deductions, and additional voluntary contributions, and to specify whether to include the threshold when calculating the student loan amount. You can also specify effective dates for these deductions and contributions.
When entering student loan tax override information for employees, you should also be aware of the following:
Student loan overrides can be used only to lower the calculation. Overrides can no longer be used to increase the amount to a higher than standard amount. To increase the employee contribution, you must now use an additional voluntary amount.
Student loan override calculates first and overrides the standard rate in the F75A0001 table.
Student loan penalty calculates second and is independent from the standard or override amount.
Student loan voluntary amount is an additional discretionary amount chosen by the employee. This amount calculates third and is independent from standard, override, and penalty amounts.
The date in the Effective From Date field determines which record is active. However, each item on the effective record can have a different effective date, as entered by the user. Once the effective record is determined, the system then uses the specified effective dates for override, penalty, and voluntary calculations.
When calculating student loan amounts on a primary job (tax scales that begin with M), the system automatically selects the "Include Threshold In Override" option, and uses the threshold set up in the student loan tax parameters when calculating the amount. You can manually deselect this option. Alternatively, when calculating student loan information on a secondary job (tax scales that begin with S), the system does not select this option, and does not use the threshold when calculating student loan amounts. However, you can manually select the option if you want to include the threshold in the calculation.
When calculating student loan amounts on a primary or secondary job, the system uses pay types associated with inputs 1, 2, and 3 as the basis of calculation.
All fields are disabled in edit mode. Once a record has been committed to the database, you cannot edit it. To update student loan override information, you must enter a new record with a different effective date. Once this date is reached, the new record becomes active.
After entering employee-specific student loan information, you can process the employee through standard payroll processing. The system calculates and stores student loan tax data in tax history tables during the final update stage of payroll processing. When you run the Write NZ IR File and Report program (R75Z0006), these additional student loan details are now reported separately on both the report and the flat file that you send to the government for tax reporting purposes.