Do you have a student loan? If you are a borrower, based either in New Zealand or overseas, you should know how you would be affected by the changes effected from April 1, 2013. Please visit the following website to learn more:
http://www.ird.govt.nz/changes/student-loans/budget-student-loans.html?id=more
One of the key changes to note is that the repayment rate for student loan borrowers in New Zealand with income over the repayment threshold, for example, $367 weekly or $19,084 annually, has increased from 10% to 12%
This lift in the repayment rate will help the Government reduce the cost of the scheme and is expected to generate $420 million in savings over a five-year period when it was announced in Budget 2012.
This change will affect all New Zealand-based borrowers who earn more than repayment threshold and are receiving salary or wages and/or income from other sources. They will pay the same amount in total, but their loan balance will be repaid more swiftly, and the average repayment time will decrease by around five months.
Other initiatives
There are also a number of other initiatives to increase student loan repayments and improve the value of the scheme.
These include a borrower providing a contact person if they are taking out a loan for the first time or applying for a repayment holiday.
The Inland Revenue Department (IRD) is also increasing contact and tracking of overseas-based borrowers in default and continues to use online advertising and media campaigns to provide information to them.
Information for borrowers living or traveling overseas can be accessed at
http://www.ird.govt.nz/studentloans/overseas/
Thresholds reviewed
IRD annually reviews and sets the threshold amounts for significant under-deductions and over-deductions. For the 2014 tax year, the significant over-deduction threshold is $50. The significant under-deduction threshold remains at $60.
When a borrower has significant over-deductions on their student loan, they can request for the excess amount paid over the threshold to be applied to their loan balance, or have the excess amount refunded.
A borrower (and their employer) with significant under-deductions on their student loan will be contacted by IRD to require them to make extra student loan deductions to recover the amount.
The $1500 threshold that was applied to pre-taxed income now applies to all forms of adjusted net income and the amount for both the loan balance small balance write off and period small balance write off is under $20.
A majority of people do the right thing and repay their loans on time. However, there is also an expectation amongst the public that action is taken against those who deliberately avoid their obligation, to promote the fairness of the scheme.
The message for borrowers is, ‘Do not leave it too late, and while you may go away, your loan does not.’
For more information and how IRD can assist you in managing your loan, visit
http://www.ird.govt.nz/studentloans/
Free Workshops
If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country. Please visit our website for details.
Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He will answer your queries emailed to venkat@indiannewslink.co.nz
Read his article on stopping serious crime under Businesslink
