Online services: A system of providing services through the internet. A key feature of these proposals is to move student loan services to a web-based system.
Over-deductions (overpayments): When a borrower’s student loan repayments made through the PAYE system have been too large and therefore the deductions have exceeded the compulsory repayment obligation.
Overseas-based borrowers: Any borrower who doesn’t qualify for an interest-free student loan because they’ve been overseas for 184 or more consecutive days (and doesn’t qualify for one of the exemptions).
PAYE system: This stands for “pay as you earn” and is a system where taxpayers make payments towards their tax liability and student loans through deductions from their salary and wages each pay period. Taxpayers select a tax code based on their yearly salary or wage and their employer uses this to determine the amount of deductions for income tax and student loan repayments.
Personal tax summary: A summary of your income for the year that indicates any income tax to pay or be refunded.
Repayment holiday: A period during which a borrower is not required to make payments towards their loan, although interest continues to accrue. A repayment holiday applies only to overseas-based borrowers.
Repayment obligation: The assessment of the amount owed on your student loan for a tax year. For New Zealand-based student loan borrowers, the obligation is equal to 10 percent of your income over the repayment threshold (any repayments you have already made are deducted from this to establish your year-end payments).
Repayment threshold: The amount you can earn in a tax year before you must start paying back your loan. For the tax year 1 April 2009 to 31 March 2010, the repayment threshold is $19,084.
Salary and wage earner: A person whose main source of income is from salary or wages paid by an employer.
Secondary income: Income from a job that is separate from and in addition to a taxpayer’s main job.
Self-employed: A person who earns income from their own business activities rather than an employer.
StudyLink: A service of the Ministry of Social Development that helps students access financial support and other entitlements while they complete their studies.
Tax codes: Codes used by the PAYE system to determine the correct deductions. Taxpayers select a tax code by filling out the flow chart on the IR330 form when they start a job. The codes indicate whether a job is the taxpayer’s main or secondary employment and whether they have a student loan. If a taxpayer’s circumstances change, they may have to change their tax code.
Under-deductions (underpayments): When a borrower’s student loan repayments made through the PAYE system have been too small and the repayments are less than the compulsory repayment obligation.
Voluntary repayment bonus: The proposed Government policy whereby borrowers who make voluntary repayments over a threshold of $500 in a tax year get a repayment bonus of 10 percent of the extra amount repaid applied to their student loan.
Voluntary repayments: A payment above your compulsory repayment obligation. You can make voluntary repayments even if you earn less than the repayment threshold. A voluntary repayment will reduce the term of your student loan. You can choose to pay off some, or all, of your student loan at any time.
Year-end square-up: An assessment process at the end of the tax year (31 March) to determine if a taxpayer has paid the right amount of income tax or made the right student loan repayments.