Is student loan taxed?

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

Aaroona

3196 posts

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#166311 9-Mar-2015 10:48

I remember back when I took out my student loan, there was mention of it not being taxed when they take it from your pay.

I'm trying to work out what my pay increase (or, normal pay) will be, once I've finished paying my student loan off.
Will it simply be Net income + 12%? or is it 12% Total gross income - income tax rate?

It doesn't seem very clear from what I've read, I would assume that the Govt. would tax the Student loan payments, thus my increase would be Income + 12%, meaning the tax is already taken?

Hopefully that makes sense....

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#1253840 9-Mar-2015 10:56

why would a loan repayment be taxed?

Aaroona

3196 posts

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#1253843 9-Mar-2015 10:58

KiwiNZ: why would a loan repayment be taxed?

Call me a cynic, but, Its the government. I presume all things are taxed unless they explicitly say they aren't.

Edit: Also don't have much dealings with loans, outside of my car loan which I paid off.
That was paid for with earnings which were taxed, so I would assume same rules apply, even if it is for the government.

Andib

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#1253845 9-Mar-2015 11:01

AFAIK Student loan repayment is 12% of your Gross income. So you will essentially have a 12% payrise once you've paid it off

EDIT: Sorry Gross income**

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maxeon

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#1253847 9-Mar-2015 11:04

Andib: AFAIK Student loan repayment is 12% of your net income. So you will essentially have a 12% payrise once you've paid it off

Wow, that is news to me. I was in the impression the student loan payments were taken from gross.

Edit: Well, they are essentially taking it from gross, but did not realize it was 12% which is significant. There was an advantage few years ago for paying it off early, but not anymore.

linw

2849 posts

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#1253849 9-Mar-2015 11:07

Wouldn't it be more efficient and definitive to ask the official student loan people?

Aaroona

3196 posts

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#1253852 9-Mar-2015 11:09

linw: Wouldn't it be more efficient and definitive to ask the official student loan people?

Depends if you call waiting on hold for 45 minutes efficient... Clearly never tried to call IRD/Studylink :)

Aaroona

3196 posts

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#1253853 9-Mar-2015 11:09

linw: Wouldn't it be more efficient and definitive to ask the official student loan people?

Depends if you call waiting on hold for 45 minutes efficient... Clearly never tried to call IRD/Studylink :)

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rendezvous

194 posts

Master Geek

#1253857 9-Mar-2015 11:12

The repayment threshold is $19,084 currently. The minimum repayment is 12% of any gross income above that amount. It is not taxed, but there is interest added to the student loan. Under certain conditions (you stay in NZ), the interest is written off, essentially making it interest free.

wasabi2k

2096 posts

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#1253859 9-Mar-2015 11:13

Your payment itself isn't taxed - what tax do you think is actually being levied?

The question as to if your payments are calculated based on gross or net is valid and would affect the amount of your payment only.

rendezvous

194 posts

Master Geek

#1253860 9-Mar-2015 11:14

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.

MikeB4

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#1253868 9-Mar-2015 11:17

Aaroona:
linw: Wouldn't it be more efficient and definitive to ask the official student loan people?

Depends if you call waiting on hold for 45 minutes efficient... Clearly never tried to call IRD/Studylink :)

You can email Studylink

http://faqs.studylink.govt.nz/app/ask

Geese

1028 posts

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#1253869 9-Mar-2015 11:18

Its 12% of your gross income over the pay period repayment threshold of $367 per week.

So how much extra you will get in your pay by no longer having to pay a student loan will depend on how much your pay is. Someone on minimum wage would hardly notice the difference, the percentage would be very low... but someone on $2500 a week the reduction would be quite significant.

Of course the extra income not going toward student loan repayments will now incur income tax.

Aaroona

3196 posts

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#1253874 9-Mar-2015 11:21

IlDuce: Its 12% of your gross income over the pay period repayment threshold of $367 per week.

So how much extra you will get in your pay by no longer having to pay a student loan will depend on how much your pay is. Someone on minimum wage would hardly notice the difference, the percentage would be very low... but someone on $2500 a week the reduction would be quite significant.

Thanks guys.

So based on what's being said here. It will be 12% Total Gross - applicable tax rate = my net increase.

Geese

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#1253877 9-Mar-2015 11:23

Aaroona: So based on what's being said here. It will be 12% Total Gross - applicable tax rate = my net increase.

Yes, and then that extra (gross) will be taxed as normal.

heapsort

245 posts

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#1253879 9-Mar-2015 11:25

To work it out for sure there are calculators at the IRD website but I have found the independent one at www.paye.net.nz more useful. To add student loan repayments, press the Options button and there is a checkbox under the student loans tab.

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