A student loan repayment is one of the clearest deductions on a New Zealand payslip, and one of the most misunderstood. It is not 12% of your whole salary. It is 12% of the amount you earn above $24,128 a year (for 2026-27). Below that threshold, compulsory repayments through PAYE are generally nil.
Why a modest pay rise can feel expensive
Once you cross the threshold, every extra dollar of liable income attracts income tax at your marginal rate, ACC (until the levy cap), KiwiSaver if you contribute, and student loan. The combined marginal “keep” rate can feel steep even though none of those pieces is unusual on its own. That is why people sometimes say a pay rise “disappeared” — several deductions moved together.
A simple worked shape
Suppose you earn well above the threshold. Only the slice above $24,128 is multiplied by 12%. Someone earning just under the threshold may see almost no loan deduction; someone a few thousand above it sees a noticeable line appear. The jump is real, but it is arithmetic, not a penalty for crossing an invisible wall that re-taxes everything below.
Tax code and catch-ups
Your employer withholds loan repayments when your tax code includes SL. If you should have SL and do not, IRD can assess underpayments later. Extra voluntary payments are possible through your loan account, but they are separate from the compulsory PAYE deduction the calculator models.
The threshold applies per pay period
Payroll does not wait until year end to see whether you cleared the annual threshold. It applies a pay-period share of it — a weekly slice for weekly pay, a fortnightly slice for fortnightly pay — and deducts 12%of anything above that. For steady salaries the two approaches agree. For irregular income they do not: a big month followed by a quiet one can deduct more across the year than your actual annual liability, because the quiet month's unused threshold is not automatically credited back against the busy one. If your income is lumpy, it is worth checking your end-of-year position rather than assuming payroll has landed exactly right.
A second job deducts on its own
Each employer applies the rules to the pay it provides, without visibility of the other. On a secondary job the repayment is generally deducted from the first dollar, because the threshold is treated as already used by your main income. That is usually correct, but it can over-deduct if your combined income is modest. Inland Revenue can issue a special deduction rate to fix a mismatch — it is a request you have to make, not something payroll can resolve.
What the calculator includes — and skips
FinLab's take-home tool applies the published repayment rate and threshold alongside income tax, ACC and KiwiSaver. It does not model overseas-based repayment rules, special assessment arrangements, or writing off remaining balances after the standard repayment period rules. Those sit with Inland Revenue and your loan statement. Use the calculator to understand cashflow; use IRD for the legal balance.
Planning around a first home
Student loan balances also matter later in the journey: banks count the remaining loan in debt-to-income assessments. A lower balance (or a repayment holiday ending) can change both your monthly cashflow and your borrowing range. That is why the income tools and the borrowing tool are meant to be read together, not in isolation.