Student loan
If your employee has a tax code with SL attached, student loan repayments will be automatically deducted from their pay if they earn above the threshold. 12% will be deducted from their pay unless they have been granted a special rate.
If it's your employee's secondary job, 12% will be automatically deducted from their pay regardless of the threshold. This is because IRD has already taken into account the employee's main job.
For any extra payments including bonuses, student loan repayments are included in the pay. Student loan is deducted based on % Gross Taxable Earnings.
Once your employee fully repays their student loan, it is their responsibility to ask you to update their tax code so no further repayments are deducted.
Student loan repayment threshold
Student loan repayments will only be deducted if your employee earns above the threshold. The amount your employee has to pay to their student loan each year is 12% of every dollar they earn over the repayment threshold.
From 1st of April 2024, the new repayment threshold for the tax year is as follows:
- $464 if paid weekly.
- $928 if paid fortnightly.
- $2,010.66 if paid monthly.
Student loan repayments for your secondary job
The repayment threshold does not apply to secondary jobs because it has already been taken into account with your employee's main job. This means your employee repays 12% of every dollar they earn from their secondary job to their student loan.
For example, if your employee earns $200 a week before tax in a secondary job, their repayment will be $24.
$200 (weekly pay before tax) × 12% (repayment rate) = $24.
SLCIR
SLCIR is a compulsory extra student loan deduction. Your employee pays 12% of every dollar they earn over the student loan repayment threshold. If they have a SLCIR, they pay an additional 5% in repayments. Your employee may have a SLCIR because they have underpaid their student loan previously.
For SLCIR deductions, IRD will issue you with a notice to recover extra payments. This is usually in the form of a debt amount to be recovered at the rate of 5%. (Note: this will appear in the IRD notice with a rate of 41.67%. However, you only need to deduct an extra 5% as 41.67% of the standard 12% student loan rate is 5%). From 1 April 2023, IRD will change its notice to state 5% for SLCIR to make the matters clearer.
How to add a SLCIR deduction to your employee's pay
1. Go to Company details > Pay components > Deductions.
2. Click on Add and under Description, write SLCIR.
3. Status: Active.
4. Based on % of Gross Taxable.
5. Tick on Debt Repayment and SLCIR.
6. Save.
7. Click Contract groups and choose the group the employee belongs in, eg. Salaried Employees.
8. Scroll down to Deductions and tick on SLCIR.
9. Enter the rate as 0.05 and Save.
10. Click on Employee details > Employee list.
11. Select the employee and then click Employee payments.
12. Scroll down to Deductions and tick on SLCIR.
13. Enter the total debt owing and Save.
Note: Once the total debt owing has been fully paid off, the deduction will automatically turn itself off. You can check on the debt balance by selecting the employee from the Employee list and then clicking Debt balances.
SLBOR
SLBOR is a voluntary additional payment to a student loan. Your employee may wish to pay off their student loan faster and ask you to help them set up a SLBOR payment.
Note: This payment doesn't recognise the student loan threshold so even if your employee earns under the threshold, SLBOR payments will be deducted from their pay.
As this payment is voluntary, your employee can choose whether they want to have a percentage (eg. 1%) or have a fixed dollar amount (eg. $10) deducted from their pay. They can also start and stop these payments as they wish.
How to add a SLBOR deduction to your employee's pay
1. Go to Company details > Pay components > Deductions.
2. Click on Add and under Description, write SLBOR.
3. Status: Active.
4. Based on % of Gross Taxable, or Fixed dollar amount.
5. Tick on SLBOR.
6. Save.
7. Click Contract groups and choose the group the employee belongs in, eg. Salaried Employees.
8. Scroll down to Deductions and tick on SLBOR.
9. Save.
10. Click on Employee details > Employee list.
11. Select the employee and then click Employee payments.
12. Scroll down to Deductions and tick on SLBOR.
13. Enter the rate and Save.
To turn off the SLBOR deduction, simply untick SLBOR from the employee's Employee Payments > Deductions section.