Student loan holiday cut as tax shifts take effect
Student loan repayment holidays for borrowers going overseas have been cut short, under 2011 Budget changes that came into effect yesterday.
Employers may also start cutting down on KiwiSaver and superannuation fund contributions since they will now be subject to tax.
The Inland Revenue tax changes affect student loans, KiwiSaver and Working for Families tax credits.
Inland Revenue acting customer services manager Denis McDermott said it was important people were aware of the changes brought about in the 2011 Budget.
Details could be found on the website, www.ird.govt.nz, where student loan borrowers could also now find up-to-date balances and information in the department's attempt to improve administration, management and repayments.
Repayment holidays for student loan borrowers going overseas have been cut from three years to one, and late-payment penalties have been reduced from 1.5 per cent to 0.843 per cent.
"They are designed to reduce the possibility of borrowers defaulting on their loans and help address the overall size of student loan debt," Mr McDermott said.
Borrowers being consistently noncompliant with repayments could also be forced to make full repayment, regardless of how much was outstanding.
And those earning more than $367 a week must add "SL" to their tax code to ensure loans are paid off at the right rate.
"If you want to pay off your loan faster, you can make extra repayments. You can pay Inland Revenue directly or ask your employer to make extra deductions."
KiwiSaver members would also see changes, with Government now contributing 50 cents for each $1 contributed by individual KiwiSaver members, to a maximum of $521.43 a year. Previously the Government contributed a maximum of $1,042.86 year.
People might see a reduction in their funds since employer contributions are now taxed, with the 2 per cent tax exemption removed.
There were also changes to abatement rates for Working for Families tax credits, Mr McDermott said.
The inflation adjustment for family tax credit amounts for children 16 and over will be removed until the amounts for younger children catch up. All family tax credit amounts would then be adjusted for inflation.
The Dominion Post