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Inland Revenue

Tax Policy

Students working part-time while they are studying

Clauses 48 to 54


(Lenore Bamfield, NZ Union of Students’ Associations, Whitireia Community Law Centre, Auckland University Students’ Association)

Submitters raised three concerns with the exemption. The first is that compared with the status quo, borrowers’ compliance costs will increase and Inland Revenue will have an additional administrative function.

The second concern is that as drafted, borrowers who study full-time for part of the year may be unable to access the full-time study repayment exemption.

Thirdly, income earned by students during periods of non-study – for example, during the summer holidays, should be ring-fenced and exempt from pay-period repayments.

Issue 1: Exemption will increase compliance and administration costs

The proposed online election process for full-time students to elect the full-time study exemption, and therefore not be required to have student loan deductions made, will impose greater compliance and administration costs than the status quo.

This will set up two tiers of repayment obligations between full-time students – those who know about the exemption and those who do not. The pay-period basis would be punitive as students tend to work longer hours during non-teaching periods to supplement their income. The exemption and an advertising campaign would not mitigate the unfairness of the pay-period basis. (NZ Union of Students’ Associations, Auckland University Students’ Association)


Officials consider that although compliance and administration costs will be incurred, these costs will be kept to a minimum. Also, without a formal election process, borrowers would face greater compliance costs in dealing with attempts by Inland Revenue to apply the student loan deduction code to their salary or wage income.

Inland Revenue will ensure that the exemption available to students who are undertaking full-time study is communicated to students. This will also include but not be limited to highlighting the information on the borrower’s loan account, and in other information sent to borrowers.


That the submission be declined.

Issue 2: Full-time study but for only part of the year

The bill provides that full-time full-year students are not required to have repayment deductions made from their salary or wages. This is achieved by borrowers applying online for a full-time full-year study exemption.

Submitters’ are concerned that as drafted, borrowers who begin or cease study part-way through an income year and who are under the annual repayment threshold amount will not be able to qualify for the full-time study repayment exemption. The bill requires borrowers to study for the full year and be under the annual repayment threshold.


Officials agree with the submitters that the exemption should be extended to students who undertake the equivalent of a full-time study workload for part of a year (for example, begin or cease study part-way through a year).

However, the exemption should not be extended to part-time study involving less than a full-time study workload as this would open the exemption up to abuse by borrowers who would undertake part-time study in order to postpone their student loan repayments.

To determine whether the borrower is undertaking full-time study for the repayment exemption, officials propose that this exemption adopt the same criteria used to determine whether a qualification is full-time or part-time for eligibility for the student allowances and the Student Loan Scheme, namely, the Loan Entry Threshold (LET) table.


That the submission be accepted, subject to officials’ comments.

Issue 3: Ring-fence income of students during periods of non-study

Income earned by a student during periods of non-study should be exempt from pay-period repayments by ring-fencing this income. This would alleviate the problems with the exemption.

The submitter recognises that there may be administrative issues in ring-fencing holiday work, such as the definition of “holiday work” (which could be limited to a period of 12 weeks work, whether there is a minimum number of hours needed to be worked to qualify, and the transition from holiday work into non-holiday work. There may also be issues for employers in administering the holiday work exemption. (Whitireia Community Law Centre)


Officials agree with the concept of ensuring that the holiday period between periods of full-time study, such as the summer holidays, should qualify for the exemption. However, we do not agree with the proposal of ring-fencing the income earned during this period.

As the submitter points out, administering the ring-fencing would be difficult. It would also enable borrowers to earn over the annual repayment threshold without having to make repayments, which would treat students more favourably than other borrowers and more favourably than under the current Student Loan Scheme Act.

Instead, officials recommend that the legislation be amended to make it clear that the exemption applies in cases where:

  • the student starts drawing down their loan but the study has not yet commenced; or
  • the student finishes their study for the year and intends to continue next year, or next semester (after the holidays).

This should address the concerns raised by the submitter.


That the submission be noted, and the changes recommended by officials be accepted.