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ANSWER ID:33693

There may be times when an employee requests deductions from their pay for a student loan. These deductions may be percentage based, a fixed amount, or a combination of both.

In all cases the employee must complete the IR330 form from the Inland Revenue Department (IRD) and give it to their employer to advise which tax code is to be used for taxing their earnings. If applicable, the employee may also provide a form from the IRD advising a Special Student Loan rate.

Employee doesn't meet earnings threshold? If an employee does not earn over a specified threshold in a pay period, no student loan repayment will calculate. Contact the IRD or visit their website for the current threshold.

Let's take you through how to set up a standard deduction, and when to use the SLBOR and SLCIR pay codes.

 

To set up standard (percentage based) deductions

A standard student loan is simply set up by choosing one of the student loan tax codes within the employee's Employment Details tab. This tax code will be specified on the IR330 form provided by the employee. The available tax codes are:

M SL - the Standard tax code for a primary source of income with a student loan

ME SL - for lower earning employees with a student loan

S SL - for a secondary source of income with a student loan

SB SL - for lower earning secondary source of income with a student loan

SH SL and ST SL - for secondary income that raises the employee into higher tax brackets

STC SL - for employees have a special tax code (STC) and also have a student loan

To set this up for the employee

  1. Go to the Maintenance command centre and click Maintain Employees.
  2. Click Select Employee.
  3. Click the employee who is repaying the student loan then click OK.
  4. Click the Employment Details tab.
  5. In the Tax Code field, select the applicable tax code (as advised by the employee on the IR330 form). See our example below.
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  6. If applicable, enter a Special SL Rate %. If no special student loan rate is advised by the employee (on the applicable form), leave this as 0.00%.
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  7. Click Close.

Your employee is now set up for Standard Student Loan repayments and these will now automatically be deducted from your employee's pay.

When to use the SLBOR and SLCIR codes

SLBOR - when your employee asks for voluntary extra deductions. To make payments using this code, go to the Compulsory Deductions tab of the Maintain Employees window for each required employee and enter the percentage.

SLCIR - when the IRD requires you to make compulsory extra deductions, see IRD letter for varying student loan repayment rate (SLCIR). For voluntary extra deductions, complete these steps:

To enter fixed deduction amounts for SLBOR

  1. Go to the Maintenance command centre and click Maintain Employees.
  2. Click Select Employee.
  3. Click the employee who is repaying the student loan then click OK.
  4. Click the Compulsory Deductions tab.
  5. Under Additional Student Loan Deductions, select the SLBOR option and enter the Rate of their decuction. Here's our example where a rate of 1% is specified:
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  6. Click the Pay Defaults/Totals tab. The SLBOR Pay Code will now be listed.
  7. Next to the SLBOR Pay Code:
    • enter 1.00 in the Quantity column
    • enter the required duction amount in the Rate column
    • set the Type to Regular. Here's our example:
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  8. Click Close

For more information on the SLBOR and SLCIR pay codes, visit the IRD website.