Student Loan Tax
Updated for 2026 IRD rates
How Student Loan Repayments Work
If you have a New Zealand student loan, you must make repayments once your income exceeds the repayment threshold. Repayments are collected through the tax system — your employer deducts them from your pay via PAYE (for employees), or you make them through your annual tax return (if you're self-employed). The interest on New Zealand-based student loans is set at 0% for borrowers living in New Zealand.
Repayment Threshold and Rates
For the 2026 tax year:
- Repayment threshold: $24,128 per year ($464 per week or $2,010 per month) before tax
- Repayment rate: 12% of every dollar earned above the threshold
- Voluntary repayments: You can make additional voluntary repayments at any time without penalty
If your income is below the threshold, no repayments are required. However, you can still make voluntary repayments to reduce your loan balance faster.
Student Loan Deductions Through PAYE
If you're an employee, your employer deducts student loan repayments from your wages or salary through the PAYE system. The deduction is calculated as 12% of your gross earnings above the weekly or fortnightly repayment threshold. Your employer uses your tax code to determine whether to make deductions — use the 'M SL' or 'S SL' tax codes as appropriate.
Self-Employed Student Loan Repayments
If you're self-employed, you don't have an employer to make deductions. Instead, you must make student loan repayments through your annual tax return. The repayment is calculated as 12% of your business profits (after expenses) above the threshold. You may need to include an estimate of your student loan repayment in your provisional tax payments.
Overseas Borrower Obligations
If you move overseas, your student loan obligations change significantly:
- Interest: Interest applies to your loan from the date you leave New Zealand — 4.9% for the 2025/26 year, rising to 5.6% from 1 April 2026
- Repayment threshold (overseas): If you're overseas for 6 months or more, the repayment threshold is based on your overseas income, but you still need to make compulsory repayments
- Overseas-based borrower levy: An additional levy of $322 per year (2026 rate) for borrowers who have been overseas for more than 6 months
- Reporting: You must advise IRD of your overseas address and income details
Failure to comply with overseas repayment obligations can result in penalties and the loan being referred to a collection agency.
Student Loan and Your Tax Return
Your student loan balance and repayment history are available through myIR. At the end of the tax year, IRD reconciles the total repayments made against your actual liability. If too much was deducted, you'll receive a refund credited to your student loan account. If too little was deducted (e.g. because of multiple jobs or incorrect tax code), you'll need to pay the shortfall.
Student Loan and KiwiSaver
Your KiwiSaver contributions are deducted from your gross pay before the student loan repayment calculation. This means you won't pay student loan repayments on the portion of your salary that goes to KiwiSaver. However, employer KiwiSaver contributions are not included in your income for student loan purposes.
The 2025/26 and 2026/27 Figures
For both the 2025/26 and 2026/27 tax years, the annual repayment threshold is $24,128 — equivalent to $464 per week or $2,010 per month. You repay 12% of every dollar above the threshold, deducted from salary and wages via your PAYE tax code (M SL or S SL), or paid through your return if you are self-employed. The loan is interest-free while you live in New Zealand — a benefit worth protecting by keeping IRD's records of your address current. For overseas-based borrowers, interest applies from the date you leave: the rate is 4.9% for 2025/26 and rises to 5.6% from 1 April 2026, plus the overseas-based borrower levy of around $322 per year. Voluntary repayments are always allowed without penalty and can be made through myIR at any time.
Common Repayment Mistakes
- Wrong tax code: using M instead of M SL means no deductions are made, and you face a lump-sum bill at year end — with late payment interest if you miss the due date.
- Second jobs: the threshold applies only to your main job — secondary jobs are deducted at 12% on every dollar, which is correct but often surprises people.
- Salary sacrifice into KiwiSaver: KiwiSaver contributions are deducted before the student loan calculation, so higher KiwiSaver rates slightly reduce your compulsory repayments — but voluntary repayments usually beat KiwiSaver as a debt-reduction move.
- Overseas moves: leaving NZ without telling IRD triggers interest from your departure date; notify IRD of your overseas address and income before you go.
Related Guides
Deep dive — 2026 update
Repayment at real salary levels (2026/27)
The repayment threshold is $24,128 and the rate is 12 cents per dollar above it, deducted through PAYE at 12% of each pay period's earnings over the pro-rated threshold.
| Annual salary | Income over threshold | Annual repayment (12%) | Per fortnight |
|---|---|---|---|
| $30,000 | $5,872 | $704.64 | $27.10 |
| $45,000 | $20,872 | $2,504.64 | $96.33 |
| $60,000 | $35,872 | $4,304.64 | $165.56 |
| $80,000 | $55,872 | $6,704.64 | $257.87 |
Note the flat effect: at $30,000 the repayment is about 2.3% of gross pay, at $80,000 it is 8.4%. Above $24,128 through PAYE there is no graduation — every extra dollar over the threshold is repaid at 12%.
Overseas-based borrowers: the balance-band obligation
If you live overseas for 183 days or more in a tax year you become an overseas-based borrower. Your repayment obligation is set by your loan balance, not your income:
| Loan balance | Due by 30 September | Total due by 31 March |
|---|---|---|
| Under $1,000 | Half the balance | The remaining half |
| $1,000 – $15,000 | $500 | $1,000 |
| $15,000 – $30,000 | $1,000 | $2,000 |
| $30,000 – $45,000 | $1,500 | $3,000 |
| $45,000 – $60,000 | $2,000 | $4,000 |
| Over $60,000 | $2,500 | $5,000 |
Two important characteristics of this system: your minimum repayments never decrease as your balance falls, and interest is charged on the loan while you are overseas. IRD notes that at the current interest rate a balance over $89,285 means the minimum repayments will not even cover the interest — so the debt grows while you make the required payments. Temporary repayment suspensions are available if you are studying or working voluntarily overseas.
Interest-free status: what preserves it
- In New Zealand: interest-free, including while studying again.
- Overseas, generally: interest applies from the day after you leave, unless you qualify for a temporary repayment suspension.
- Studying overseas: you can apply for a suspension for the period of full-time study at an approved institution.
- Volunteering for an approved charity overseas: interest-free while the placement lasts, provided you meet the Student Loan Scheme Act requirements.
Self-employed borrowers: the interim dates
With no PAYE to deduct from, self-employed borrowers pay interim student loan repayments by 15 January and end-of-year amounts by 8 February. The interim payments count towards the final obligation, and getting them wrong attracts interest — a mechanic many newly self-employed borrowers discover only in February.