Did you know …
That there are a number of income adjustments you are legally obligated to advise Inland Revenue about with regard to your student loan?
They use this information to calculate whether you are due to make a year-end repayment on your loan. These adjustments can amount to significant repayment obligations – which you may be unprepared for!
Inland Revenue's aim is to have employers deduct the correct amounts from taxpayers' salaries and wages. Any errors (such as over- or under-deductions) are corrected by the employer, at Inland Revenue's request.
Inland Revenue's focus is now on collecting student loan repayments from those who earn other types of income. This can result in a large student loan bill at the end of the year.
Inland Revenue use a lot of terminology regarding student loan repayment obligations, such as "income adjustments", "adjusted net income" or "liable adjusted net income". We won't go into the semantics but we will try to outline the basics for you:
If you earn $1,500.00 or more of "other income" (ie not from salary and wages) then you must pay Inland Revenue 12% on that income towards your student loan - if your annual earnings are over $19,084.00.
The main types of "other income" include:
- interest received
- overseas income
- rental income
- distributions from a trust (including non-taxable distributions)
- profit left in a company (if you own 10% or more of the shares)
- profit left in a trust (if you are a settlor)
If you expect your yearly earnings will be below the repayment threshold of $19,084.00 and you are working for wages, you can apply for a special tax code or a student loan deduction exemption. These mean your employer will not have to deduct student loan repayments from your wages. Talk to us about whether you qualify for these.
The actual calculations can be quite complicated so if you think you may have a potential issue we recommend you contact us for help in calculating your obligations - we would be happy to discuss any tax matters with you in greater depth.