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Inland Revenue

Tax Policy

Additional deduction rate

Clause 33


(Matter raised by officials)

The bill currently provides for a special deduction rate to be imposed on the salary and wage payments of borrowers to recoup either a significant under-payment, repay outstanding amounts, or make additional payments to repay the loan (and thereby qualify for the excess repayment bonus). The bill provides that the special deduction rate is administered by way of a special tax code of “SLADR”.

To more easily identify what the special deduction rate is for, officials recommend that the rate be split in two and have a special code for borrower-instigated special deductions (SLBOR) and a special code for Commissioner-instigated special deductions (SLCIR).

This will enable the Commissioner to apply more easily the payment priority rules, which differ between borrower and Commissioner-instigated deductions.[1]

Officials recommend that this change applies with effect from 1 April 2012.


That the submission be accepted.


1 Borrower-instigated deductions are first applied to repay any outstanding debt and any remainder goes to repay the loan. Commissioner-instigated deductions are usually tagged to specific repayments or debts and the payment is applied to this liability first and any remainder goes to repay other debts.