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Inland Revenue

Tax Policy

Extending pay-period assessments to the salaries and wages of all borrowers

(Clauses 5, 8, 10, 11, 15, 21, 22, 23 and 24)

Summary of proposed amendments

The proposed amendments extend pay-period assessments to the salaries and wages of all borrowers. Borrowers with “other income”, such as rental or business income, will have their salary and wage earnings shift from an annual assessment basis, where the income is spread across a tax year, to pay-period assessments, where the focus is on ensuring correct repayment deductions are made at source. To achieve this, the bill contains amendments to exclude salary and wage income from the calculation of annual student loan repayment obligations for borrowers with “other income”. The amendments will also ensure that repayment deductions are correct in special circumstances such as secondary employment or full-time study.

Application date

The amendments will apply from 1 April 2012.

Key features

The bill extends pay-period assessments to all salary and wage earnings. Borrowers with other sources of income will still receive an annual assessment of any income that is not salary or wages.

Clause 15 changes the way that repayment obligations are calculated for borrowers with other income so that salary and wage earnings are excluded.

Clause 8 gives borrowers with “other income” access to the procedure by which an unused repayment threshold from a borrower's primary employment earnings can be allocated to the borrower's secondary employment earnings.

Clause 11 gives borrowers with other income access to the process under which certain borrowers who are full-time students may obtain an exemption from salary or wage deductions.

Clause 5 extends the definition of “significant over-deduction” to include borrowers with other income. In the event that a significant over-deduction is identified, Inland Revenue is required to notify the borrower, and the borrower may choose to receive a refund of the over-deduction.


Pay-period assessments were introduced in the Student Loan Scheme Act 2011 and are a significant simplification measure, removing the need for the annual square-up assessment for most borrowers’ salary and wage earnings.

As part of the Budget 2011 student loan package, it was announced that losses from investments or business activities would no longer be included when calculating a borrower’s repayment obligation. As there is no longer the ability to offset losses, there is no need to distinguish between borrowers who receive other income and borrowers who do not. Pay-period assessments can now be extended to all salary and wage earnings.