Student Loan - SLBOR, SLCIR and Special Deduction Rate
The two additional codes SLCIR and SLBOR were introduced from 1 April 2012.
These are not to replace the actual tax code (for example M SL and so on), but are used as well as the tax code.
SLCIR is "Commissioner deduction" and is used for required additional student loan repayments. IRD will advise you if additional deductions are to be made using SLCIR.
SLBOR is "Borrower deduction" and is used for voluntary additional student loan repayments. For SLBOR deductions, the employee will advise their employer if they wish to make additional payments to reduce their loan balance.
Special Deduction Rate (SDR) - a third option is the "Special Deduction Rate", which is another Student Loan rate you will use only if advised by the IRD.
The options to use SLCIR, SLBOR or the SDR, will only appear if you have student loan deduction tax code entered for the employee. For example M SL, S SL and so on.
Special note - For M SL and ME SL tax codes the Student Loan Deduction is zero when the employees weekly pay is lower than a certain amount.
For example, for the 2013/2014 tax year the threshold is $367 per week. For a fortnightly employee this is $734 per fortnight, four-weekly $1,468 and monthly $1,590.33. If the employees gross pay for the pay period is lower than this amount then the Student Loan Deduction amount will be zero.
This threshold sometimes changes from year to year so the above figures may not apply for later years.
Payslip and IR348 (Employer Monthly Schedule)
The SLCIR and SLBOR amounts will not be separated out on the payslip (to avoid extra clutter). The total Student Loan amount will be shown - standard deduction plus any SLCIR and/or SLBOR.
However, the SLCIR and SLBOR will be itemised on the Employer Monthly Schedule as is required by the IRD.
SLCIR Code - If IRD advises SLCIR of 41.67%, then you should enter 5% in Payroll Pro.
The IRD have advised us and all other payroll software providers that the maximum SLCIR rate is 5%, so this could be 1%, 2%, 3%, 4% or 5%. They have advised us that a percentage greater than this cannot be used. However, IRD appear to be telling employers to use a different percentage such as 41.67% of the standard rate. By this, they mean 41.67% of 12% which is 5%. More details are below.
If IRD advises that SLCIR should be 41.67%, then what they mean is that it should be 41.67% of the standard student loan rate. Currently the standard student loan rate is 12%.
Therefore if the IRD advises SLCIR is to be 41.67% they mean 41.67% of 12% which is 5%.
This is very confusing, and we hope that IRD will make things easier for employers and say 5% instead of 41.67% in the future!
(If you are looking for the example with SLBOR click here)
In this example, you receive a notice that IRD requires you to deduct extra student loan (SLCIR) at a rate of 41.67% of the standard student loan rate, and the Amount To Recover is $240.00.
To do this:
1. Select "Enter Current Pay" from the main menu, and select the employee.
2. To the lower right hand side you will see this:
3. Click the white SLCIR box, and then the SLCIR information will appear.
Here is a full view:
4. Click in the SLCIR box and choose the rate from the list.
In our example, the IRD advised SLCIR is to be 41.67% of the standard rate, so they mean 41.67% of 12% which is 5%
5. Then enter the amount to recover in the next box, which is 240 in our example.
6. Finally click OK and you will return to the payslip tab where you will see the 5% showing in the box - SLCIR: 5%.
7. Payroll Pro will automatically reduce the amount to recover each pay until it is zero, at which time Payroll Prol will stop making the deductions.
8. Note: The SLCIR amount will not be separated out` on the payslip. This is to avoid extra clutter. So only the Total Student Loan amount will be shown - standard deduction plus any SLCIR and/or SLBOR. However, any SLCIR and/or SLBOR will be itemised on the Employer Monthly Schedule as is required by the IRD.
An employee is earning less than $200 per week and is on the M SL tax code, so currently no Student Loan amount is being deducted from their pay (as they are under the threshold of $367 per week). The employee would like to voluntarily pay off $20 from their student loan each pay.
1. First, ensure their tax code is M SL. If it is just M, then change it to M SL.
2. Next, under "Enter Current Pay" to the lower right, you will see the SLCIR, SLBOR and SDR boxes:
3. Click on SLBOR and you will be given the option to enter a percentage or an amount.
Here is a full view:
4. Click in the SLBOR box and select the relevant option "% of gross" or "flat $ amount".
In our example we are entering $20, so select "flat $ amount" and enter 20 in the amount box.
5. Click OK and you will return to the payslip tab where you will see the student loan repayment amount is $20.
6. Note: The SLBOR amount will not be separated out on the payslip. This is to avoid extra clutter. So only the Total Student Loan amount will be shown - standard deduction plus any SLCIR and/or SLBOR. However, any SLCIR and/or SLBOR will be itemised on the Employer Monthly Schedule as is required by the IRD.