Is student loan taxed?

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Forums › Finance and wealth management › Is student loan taxed?

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Ultimate Geek
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#1253880 9-Mar-2015 11:26

The 12% figure is not entirely correct. It all depends on how much you earn, for example.

My loan payment is 9.15% of my gross salary and 13.55% of my net income.

You can use their calculator to work out your payments etc http://www.ird.govt.nz/calculators/tool-name/tools-s/calculator-sl-repayments.html

mentalinc

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#1253936 9-Mar-2015 12:37

www.paye.net.nz/calculator.html

Great calculator to work out what you get paid net and where it all goes in tax, kiwisaver and student loan repayments.

should get you within a few cents..

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khull

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#1253967 9-Mar-2015 13:03

A timely reminder NOT to to make any extra payments unless you have some fetish or duty to the government if you remain in NZ

At 0% interest it is your next best bet to finding a tree that grows dollar bills. Any extra repayments off your minimum will just be on top of your net take home pay which is taxed. That includes if you win lotto or come across any capital gains. I've mentioned before the final thing you should do is to settle the student loan AFTER your death (hey that is impossible. get it?)

It might be sad/inconsiderate or whatever stance you choose to take. But we don't make the rules up, and entrust people who earn 6 figures with 6% pay rises in the beehive to decide for us.

Aaroona

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#1254024 9-Mar-2015 14:01

khull: A timely reminder NOT to to make any extra payments unless you have some fetish or duty to the government if you remain in NZ

At 0% interest it is your next best bet to finding a tree that grows dollar bills. Any extra repayments off your minimum will just be on top of your net take home pay which is taxed. That includes if you win lotto or come across any capital gains. I've mentioned before the final thing you should do is to settle the student loan AFTER your death (hey that is impossible. get it?)

It might be sad/inconsiderate or whatever stance you choose to take. But we don't make the rules up, and entrust people who earn 6 figures with 6% pay rises in the beehive to decide for us.

Absolutely agree - I've been taking that stance for a while now.. But to be honest, I'm down to my last $700 now, so I just want to get it paid off. I paid off my car loan last week as well, so while I was on a role, I thought I'd get it done as well.
Then I can start saving properly again.

MileHighKiwi

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#1254049 9-Mar-2015 14:27

Btw, your pay slip should show how much you are paying on your loan.

Batman

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#1254085 9-Mar-2015 15:31

it's not net income + 12%, it's net income x 1.12

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afe66

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#1254155 9-Mar-2015 16:28

" khull: A timely reminder NOT to to make any extra payments unless you have some fetish or duty to the government if you remain in NZ"

Don't underestimate the relief / satisfaction of paying it off. I found it the final transition from being child/student to professional adult.

Once it's gone, no longer do you care when ever changes are proposed to the system.

I have friends being chased by IRD who are out of the country, they admit to the anxiety they have and regret their decision to leave. They are nervous about returning to nz and changes our government is making with Australian government. One flew into nz for a wedding over weekend and left Sunday night. IRD rang her parents Monday morning asking if she was there.

Lotto is tax free and individuals don't pay tax on capital gains.

That 12% extra tax really starts to bite when your on 33%, extra shifts/overtime become more onerous when your being taxed at 45%.

Do you trust the government not to change the conditions again to make them more expensive ? (or sell the account)

A.

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#1254176 9-Mar-2015 16:59

joker97: it's not net income + 12%, it's net income x 1.12

hmm brain not working got it completely wrong.

it's not that simple ... the 12% was taken off your gross income not nett, not sure why i used that formula.

so as AFE was saying you are currently paying

gross X [PAYE + 12%] worth of tax

without student loan you will get gross x 1.12 more, ie a tax deduction of 12%! woo hoo

mattwnz

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#1254191 9-Mar-2015 17:20

rendezvous: I guess it depends how you look at it. Your entire gross income is taxed, then the student loan payment comes out. So the income that you have to pay to student loan still has income tax on it.

That's the same with anything you spend your money on, which you earn and has been taxed though.

code15

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#1254219 9-Mar-2015 17:44

No threshold anymore.

You pay 12% of your gross income toward your loan balance.

You still pay PAYE on your gross earnings, i.e you pay tax on your loan repayments.

In a similar way you pay tax on your employee contributions towards KiwiSaver.

Edit: I'm wrong with regards to their being no threshold... Got confused with the new opt out policy.

mudguard

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#1254237 9-Mar-2015 18:13

On a similar note, the fifteenth of the month will be my first since paying off my student loan. Can't wait!

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khull

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#1254348 9-Mar-2015 20:47

afe66: " khull: A timely reminder NOT to to make any extra payments unless you have some fetish or duty to the government if you remain in NZ"

Don't underestimate the relief / satisfaction of paying it off. I found it the final transition from being child/student to professional adult.

Once it's gone, no longer do you care when ever changes are proposed to the system.

I have friends being chased by IRD who are out of the country, they admit to the anxiety they have and regret their decision to leave. They are nervous about returning to nz and changes our government is making with Australian government. One flew into nz for a wedding over weekend and left Sunday night. IRD rang her parents Monday morning asking if she was there.

Lotto is tax free and individuals don't pay tax on capital gains.

That 12% extra tax really starts to bite when your on 33%, extra shifts/overtime become more onerous when your being taxed at 45%.

Do you trust the government not to change the conditions again to make them more expensive ? (or sell the account)

A.

No where as much relief when I pay my home loan off. When negotiating remuneration base rates, just add 12% to your expectation. That sounds absurd but that should be your starting point and will help come to a realistic expectation. Some people even add super on top. Where not possible negotiate the same value in your above base benefits instead . E.g. Car park, leave etc. at the end of the student loan consider a pay raise instead. Surely that is better than any short term satisfaction. Perhaps i view it differently

afe66

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#1254400 9-Mar-2015 22:58

As always different opinions are available.

Strangely I found paying off my loan more satisfying than paying off my mortgage, as it was something I felt I had to get rid of before I could start the next stage of my life. While a mortgage was understood to take along time to repay so I didn't fear as much the need to pay it off as urgently although once I did I paid a lot of my income into it, drove old car, lived fugally etc.

Because I was of that generation who had loans dumped on us with no notice, under less favourable conditions than those who followed and saw the governments fiddle with the scheme in various way; perhaps I was particularly untrusting of governments and so wanted the loan cleared. Banks are much more trust worthy/consistent.

A.

floydbloke

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#1254428 10-Mar-2015 07:31

afe66: " ...

That 12% extra tax really starts to bite when your on 33%, extra shifts/overtime become more onerous when your being taxed at 45%.
...

It's not a tax. It is real money that was lent to you (probably interest free). Do you believe it is somehow unfair that you have to pay it back?

Sometimes I use big words I don't always fully understand in an effort to make myself sound more photosynthesis.

afe66

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#1254472 10-Mar-2015 08:36

I agree it's not a tax, I was inferring that there is a downside of not actively paying your loan back as is it's slightly depressing to have 45% of income taken in tax/repayments.

That's why I made active payments and cleared my loan as fast as possible and ?enjoyed the 12% increase in take net pay once.

A.

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