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Inland Revenue

Tax Policy

Treatment of over-recovered additional deductions

(Clauses 8 and 9)

Summary of proposed amendments

The proposed amendments will align the treatment of over-recovered additional deductions of student loan repayments with the treatment specified for over-recovery of standard deductions made for student loan repayments. This will simplify administration by having one standard process.

Application date

The amendments will come into force on the date of enactment.

Key features

The proposed new sections set out the procedure to be followed when additional deductions have continued beyond what is required to fully recover the previous shortfall in student loan repayments.

The proposed replacement of the cross-heading above current section 63 will clarify that the section applies only to standard deductions.

Proposed new section 68A defines what is a Commissioner over-deduction and sets out what a borrower can do when the borrower believes there has been an over-deduction of additional deductions. The requirement for the Commissioner to respond is set out in proposed section 68B.

Under proposed section 68C, when the Commissioner identifies or determines that an over-deduction has been made, she will be required to notify the borrower of the amount of the over-deduction, that it has been offset against a borrower’s consolidated loan balance, and give the borrower the option of requesting a refund of the over-deducted amount within a specified timeframe. The time limit on requests for refunds will be six months from the date of notification. If, however, another shortfall in repayment obligations is concurrently identified, the over-recovered amount will be offset against that shortfall.


The Commissioner of Inland Revenue is able to require a New-Zealand-based student loan borrower’s employer to make additional deductions from the borrower’s wages or salary to meet a previous shortfall in repayment obligations. In doing so, the Commissioner advises the employer of the total additional amount to be deducted. However, sometimes employers continue the additional deductions beyond the amount necessary to fully recover the shortfall. Although the Student Loan Scheme Act prescribes what the Commissioner must do when there is an over-deduction of standard deductions, it does not include an over-recovery of additional deductions.