Employees who are studying full-time may provide you with a student loan special deduction rate (SDR) certificate which may authorise one of the following for student loans:
- deduct no student loan repayments at all
- deduct student loan repayments at a rate lower than the standard primary (main) or secondary rate.
The SDR certificate will indicate the rate and the period that the special rate applies for.
To set up the employee's SDR, go to the employee's file, then to "Tax Code Declaration". Firstly, ensure the employee's tax code is set to a student loan one i.e. M SL.
Once you have checked that the employee's tax code is correct, then within the "Student Loan Rate", tick on the "Eligible for SDR?" checkbox.
Then enter the rate and SDR end date as specified in the SDR certificate and click on "Save".
In the pay run, the employee's SDR rate will be applied, you will notice there that the student loan amount is showing as $0.00.
Where the employee's SDR end date is about to expire, an Action Item will appear on your business dashboard as per example shown below.
The employee will need to provide you with a new SDR certificate for the SDR to continue, otherwise the SDR will stop and the standard student loan deduction rate of 12% will be applied in the next applicable pay run.
When the employee's SDR end date has been reached, in the relevant pay run period, the student loan deduction will automatically be applied in the pay run. There will also be a pay run warning to advise you of the employee's SDR end date.
You will need to ensure that you go into the employee file, then to 'Tax Code Declaration' and update the employee's 'Student Loan Rate' to 12%, uncheck the 'Eligible for SDR?' checkbox and remove the SDR end date, then save details.
Once SDR details are saved, you will receive 'Tax code declaration saved' confirmation message.