New Tax Bracket
A new top personal income tax rate of 39% applies for the 2021–22 and later income years on annual  personal  income  that  exceeds  $180,000.  This will affect employees on the tax codes M, M SL, ME and ME SL who earn over $180,000 per year.

Two New Tax Codes
With the introduction of the new tax bracket for annual earnings above $180,000 applying from 1st  April  2021,  two  additional  secondary  tax  codes  are  being  introduced.  These  are  SA and SA SL, and will be used for employees in secondary employment and earning above the threshold. SA SL is for employees in this earnings level who are also repaying a student loan (SL).

Additional ESCT (Employer’s Superannuation Contribution Tax) Rate
A new ESCT rate threshold amount of $216,000 has been added due to the additional 39% tax bracket. This will generally affect employees earning over $216,000 who are enrolled in KiwiSaver, and receiving the KiwiSaver Employer Contribution.

 

For main employment income, the repayment threshold is increased from $385 per week to $390 per week.

This means an employee on tax code M SL or ME SL can now earn more gross pay per week before they have any student loan repayment deducted from their pay.

 

So for M SL and ME SL, the employee does not pay a standard student loan amount if their weekly earnings are $390 or lower. This is called the weekly threshold.

Weekly threshold is $390

Fortnightly threshold is $780 ($390 * 2)
Four-weekly threshold is $1,560 ($390 * 4)

Monthly threshold is $1,690 ($390 * 52 / 12)

 

Example 1:

Employee earns $490 this week, and is on the M SL tax code.

The threshold is $390, so the amount to calculate the repayment on is $490 less $390 = $100

Therefore the Student Loan Repayment amount (from April 2021) is $100 * 12% = $12.

 

Example 2:

Employee earns $375 this week, and is on the M SL tax code.

This is below the threshold of $390, so the employee has no student loan deduction this week.

 

 

HOWEVER the M SL and ME SL employees might have a student loan deduction even if they do earn less than $390 in the week if they have the additional student loan codes SLCIR or SLBOR. A summary is below. In addition IRD may request a special deduction rate (SDR) in some cases.

 

 

SLCIR and SLBOR

These were introduced in April 2012.

 

SLCIR is "Commissioner deduction" and is used for required additional student loan repayments.

SLBOR is "Borrower deduction" and is used for voluntary additional student loan repayments.

 

IRD will advise you if additional deductions are to be made using SLCIR.

For SLBOR deductions, the employee will advise their employer if they wish to make additional payments to reduce their loan balance.

 

You can enter the SLCIR and/or SLBOR amounts under "Enter Current Pay", where you will see three new white boxes under the Tax Code:

 

Click on the relevant box to enter the requried figures.

 

The S.D.R. box is for "Special Deduction Rate", which is another Student Loan rate you will use only if advised by the IRD.

 

Special Note on SLCIR Rate

SLCIR has a maximum of 5%. The IRD will advise if you need to use this for an employee.

We have found that the IRD are advising that SLCIR is to be 41.67% of the standard rate. By this they mean 41.67% of 12% which is 5%, so you will enter 5% into Payroll Pro. The reason Payroll Pro requires you to enter 5% and not 41.67% is because that is the requirement of the IRD for computerised payroll systems.

 

New formats for "payday filing" and "new & departing employee" files

Beginning immediately, a new format will be used for the "payday filing" and "new & departing employee" files uploaded to IRD. There is nothing different you will need to do since Payroll Pro will automatically use the new format. However, the "payday filing" and "new & departing employee" options within Payroll Pro have been updated to make them more user friendly.

In addition to the new file format, the "new & departing employee" file will now include KiwiSaver information, which means the same file is now used if an existing employee opts in to, or out of, KiwiSaver.