Student Loan

Student Loan is a scheme formed to help students to manage their finances during before, during and after the studies (Visit Study link to know more about it https://www.studylink.govt.nz).

With Effect from 1^st January 2018, the first year of tertiary education is free. However, for the following years you still have to apply for loan.

Student Loan Repayments

• Working in New Zealand

 If your salary is above the specified threshold then you repay 12% of every dollar earned over the threshold.

Examples:

Suppose Chris earns $1,140.58 fortnightly before tax, student loan repayment for him will be $ 47.11 ($1140.58 - $748 = $392.58, 12% of $392.58)

Please note that thresholds are only applicable for primary job, if in case Chris is working somewhere also and he is receiving $400 fortnightly then student loan deduction on this income will be $48.00 ($400 *12 %), as a result total student loan repayment will be $95.11 for the respective fortnight.

In case of under deduction of student loan, sometimes IRD asks for extra deductions @41.67% of standard deduction. So, for Chris extra deduction will be $19.63 ($47.11 * 41.67%).

• Self Employed

If you are self-employed then end of year repayment is 12% of every dollar earned over annual repayment threshold of $19,448, provided your annual adjusted net income is $1,500 or more. This means to pay student loan your adjusted total income should be $20,948 or more (including salary or wages)

Let’s work it out with an example:

Suppose Chris earns following income during the tax year-

Salary & Wages: $16,000

Adjusted net income $ 9,850

Now we will first deduct the annual threshold from salary and wages and balance from adjusted net income.

Annual repayment threshold: (16,000-19,448 = -3,448)

Balance adjustment: $9,850-3,448 = $6,402

Student loan repayment: $6,402 * 12% = $768.24

As adjusted net income is more than $1,500 so it qualifies the condition and hence Chris must pay student loan repayment of $768.24 for the tax year.

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