There are two other codes that may apply to the employee's student loan as extra deductions, these are:
- SLCIR which is a "Commissioner deduction" and is used for required additional student loan repayments. Inland Revenue Department (IRD) will advise you if additional deductions are to be made using SLCIR.
- SLBOR which is a "Borrower deduction" and is used for voluntary additional student loan repayments. For SLBOR deductions, the employee will advise you if they wish to make additional payments to reduce their loan balance.
In addition to the above, there is a Special Deduction Rate (SDR) which is a special Student Loan rate you will use and apply to the employee only if advised by the IRD.
The above codes doe not replace the employee's tax code, it is an additional code. SLCIR, SLBOR and SDR can only be applied if there is a student loan deduction tax code entered for the employee. For example M SL, ME SL, S SL, SH SL, SB SL and so on.
This article will be going through the SLCIR deduction.
SLCIR
IRD will provide a notice with the additional deductions that you must make from the employee's earnings and the total recoverable amount. Only a maximum of 5% additional deduction can be made.
Example:
- If the IRD advises SLCIR is 8.33%, they mean 8.33% x 12% which is 1%.
- If the IRD advises SLCIR is 16.67%, they mean 16.67% x 12% which is 2%
- If the IRD advises SLCIR is 25%, they mean 25% x 12% which is 3%
- If the IRD advises SLCIR is 33.33%, they mean 33.33% x 12% which is 4%
- If the IRD advises SLCIR is to be 41.67% they mean 41.67% x 12% which is 5%.
The 1% to 5% is the calculated percentage rate you will need to enter in for SLCIR deduction which is detailed below
To set up SLCIR deduction, go to the employee file and then to "Pay Run Inclusions". You will see this screen.
- Click on 'Add'.
- Select the "Student Loan Deduction (SLCIR)" deduction category from the drop down list.
- Enter the deduction amount to be applied per pay run of "Percentage of Student Loan".
- Enter in the percentage of loan amount. You will need to enter either rate 1%, 2%, 3%, 4% or 5% here. Refer to the above example.
- Select the deduction to be "Paid to the IRD".
- Select preserved earnings of "Never".
- Enter any notes if you want the employee to see them on their pay slip.
- Enter the date this inclusion is to commence.
- Choose when this inclusion should cease "After the following amount has been reached"
- Enter in the total SLCIR amount to recover as shown in the IRD letter. Once the total recoverable amount has been reached, the SLCIR deduction will stop.
- Click on 'Save'.
Below is an example of an SLCIR deduction.
Once the employee's SLCIR deduction is saved, the details will display under the Deduction line. If you need to make any edits, click on the "Student Loan Deduction (SLCIR)" text which will expand the details again, make the required edits and click on save.
The calculation method for SLCIR is:
Student loan pay period amount / extra deduction % of the standard rate
Student loan amount $868.80 per pay period. Extra deduction is 5% (IRD states 41.67% which is 41.67% x 12% = 5%)
$868.80/ 5% = $43.44
$43.44 extra deduction will be made from the employee’s pay until the total recoverable amount has been paid.
An example of the pay run and the employee's SLCIR deduction.
When you finalise the pay run, you will notice in the employee's file, in the Pay Run Inclusions, the SLCIR deduction will display the SLCIR total amount paid so far.
Once the SLCIR total recoverable amount has been reached then the SLCIR deduction will stop.
To delete the deduction, hover to the far right until the 'x' appears and then click on the 'x' icon.
A "Confirm delete" popup will appear. Click on 'OK' to continue with the deletion.