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Income Tax Act 2007

General collection rules - Employment-related taxes - Value of fringe benefits

RD 36: Repayment of employment-related loans

You could also call this:

“Paying back loans from your job with your work income”

When you use your income to pay back a loan from your job, the law treats it as if you paid it back on the first day of the income year. If you got the loan later in the year, it’s treated as paid back on that day instead.

This rule applies when you earn money from your job, like your salary, bonuses, dividends, or interest. It only counts if your employer doesn’t take out any tax before paying you, or if it’s a dividend that’s fully taxed already. The money you use to repay the loan must be part of your income for the current tax year or an earlier one.

If you use money to repay your work loan, but that money is from a future income year, you can choose to count it as income in the earlier year when you repaid the loan. But you need to tell the tax office about this choice. You have to do this within the time your employer has to file their tax return, or later if the tax office gives you more time.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520034.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
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“Valuing employee loans using market interest rates”

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Part R General collection rules
Employment-related taxes: Value of fringe benefits

RD 36Repayment of employment-related loans

  1. For the purposes of sections RD 34 and RD 35, an amount of income of an employee applied in an income year to repay an employment-related loan provided to the employee is treated as applied towards repayment on the first day of the income year or, if the date of the advance of the loan falls after that day, the later date.

  2. Subsection (1) applies only when an employee derives an amount that—

  3. is salary or wages, an extra pay, a dividend, or interest; and
    1. is payable by the relevant employer without any amount of tax being withheld and paid under the PAYE rules, the RWT rules, or the NRWT rules, or is a fully imputed dividend; and
      1. is income of the employee in the tax year in which it is applied to repay the loan, or in an earlier income year.

        1. Subsection (4) applies when an employee derives income that—

        2. is applied to repay an employment-related loan; and
          1. relates to an income year after the income year in which it is applied to repay the loan.

            1. The employee may treat the amount as derived in the earlier income year, but must notify the Commissioner of their decision within the time allowed to the employer for providing a return of income for the income year, or a longer time if the Commissioner allows.

            Compare
            Notes
            • Section RD 36(2): amended, on , by section 211(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section RD 36(2)(b): replaced, on , by section 211(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section RD 36 list of defined terms amount of tax: inserted (with effect on 1 April 2008), on , by section 128(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
            • Section RD 36 list of defined terms fully-imputed dividend: inserted (with effect on 1 April 2008), on , by section 264(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
            • Section RD 36 list of defined terms non-resident passive income: amended (with effect on 1 April 2008), on , by section 128(2)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
            • Section RD 36 list of defined terms NRWT rules: inserted (with effect on 1 April 2008), on , by section 128(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
            • Section RD 36 list of defined terms resident passive income: amended (with effect on 1 April 2008), on , by section 128(2)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
            • Section RD 36 list of defined terms RWT rules: inserted (with effect on 1 April 2008), on , by section 128(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).