By Elizabeth Davies
Over the last few years I’ve become accustomed to watching my money slip away. A huge chunk of it is gone before it even reaches my bank account, thus is the nature of being a student loaner for life.
Whilst we mourn the loss of that weekly wage percentage, we can at least feel safe in the warm, fuzzy thought that it’s going to a better place. It’s like attacking the trunk of a massive tree with a butter knife, it doesn’t seem like it’s doing anything at the time but after you’ve done it for twenty years you might be half way there.
At the moment I have three different tax codes, none of which I fully understand if I’m entirely honest. For my primary part time job my tax code is M SL, my second part time job is SB SL and my freelance work is WT. This means I have three different tax rates varying from 10.5% to 25%.
I loathe secondary income tax with nearly every inch of my soul, maybe just because I don’t fully understand it. Over my two part time jobs I work a standard 40 hour week. Yet my second job is taxed at a higher rate and therefore I make less than I would if I were working one full time job. Here is where my confusion lies. It feels like I’m being punished for having two sources of income. I’m not earning a huge amount of money, or more than my fair share in any sense of the word.
Obviously I would prefer to have one full time job, but that’s just not my current situation. When I first started working two jobs I was incredibly frustrated by secondary income tax and thought perhaps my tax return would be comparatively juicy, because surely there was some mistake. I was wrong.
Not only was my tax return practically non-existent, but what I did get was shrunk even more once the tax refund company I used had taken their 20% cut. I’ve since worked out how to file my own tax return and avoid these companies who target students that don’t know any better, but more on them later.
After standard tax add on student loan repayments. At this stage my repayments are still very small, but even a $20 deduction every week hits me hard. On top of this we also have KiwiSaver deductions. I understand saving for my retirement is important but it is a struggle to justify skipping lunch today so that I can afford an extra sherry in fifty years. I don’t even like sherry.
Looking at my pay slips these days is not far from depressing – I’m sure this only gets worse as I get older and (hopefully) earn more. It’s beginning to feel like I’ve worked hard and bought an ice cream, only to have someone bigger than me seize it and take the first lick, before passing it along to the next person and the next. Eventually I get it back but by the time I do it’s covered in other people’s spit and it’s a hell of a lot harder to savour the sweetness.
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Elizabeth Davies is a 23 year old post graduate journalism student at Auckland University of Technology. She lives with her partner in Epsom and spends her free time refurbishing vintage furniture and attempting to bake while fighting a daily battle against her bank balance. She writes a weekly article for interest.co.nz on money matters and financial struggles from a young person's perspective.
48 Comments
I thought it was pretty obvious why they have a secondary rate. If you didn't then it would be FAR better to have 2 jobs paying 40k each than one job earning 80k. Another option would be for the employee to specify how much they are earning from their primary job to their secondary job but I can't see how this would work in practicce due to weekly income variances.
Elizabeth has a very valid point . My Daughter, while a student , previuosly worked at a retail store on the minimum wage on Saturdays and Sundays for 4 hours a day , and then did some evening work at a callcentre at 50cents over the minimum wage .
The evening job was taxed at 25% , yet her total earnings from the 2 jobs were around $17,000 for the entire year .
She got a tiny tax refund in September , 6 months after the end of the tax year.
Then , take the people who do in-store demonstrations at Countdown at the minimum wage , getting taxed at 29% if they work for more than one Company.
These people generally battle to find 20 hours work a week , and they pay a higher tax rate than I do .
The system is unfair on lower income earners , and a disincentive to work .
To me it makes more sense to be taxed on your total income, regardless of source. It can always be balanced at the end of the tax year.
I'm glad to hear you learned how to file your own tax return. I too fell into the trap of the tax refund companies when I was a student and could afford it least...
Cry me a river, useless degree = piss poor job prospects. Degrees such as these should be scrapped and lets concentrate on science, medicine, eng, law, commerce. You got free money as a student loan, whet more do you want?
Harden up and stop blaming the system for your current perdicament.
However, I wish you well for the future, be positive, not backward looking.
I agree on a useless degree, neighbours kids "media studies" and various other usless things but that meant the got good NCEA grades. Then onto Uni to get degrees in media studies and similar useless areas......job prosects til operator countdown.
NB No more law, too many as it is.
The problem is science and engineering are hard and certianly with engineering dont pay well as say law, or regularly. I left that sector, dunno where my kids will go but Im reluctant to point them on the path I took, but there are worse.
regards
I tend to agree with you. I find it interesting however that you think people with Medical or Law degrees are dull at dinner parties, one could almost say that is a narrow view of people in general.
Best not to take anything here to seriously. Half the people here don't believe in climate change and think we can have economic growth forever even though we live in a finite plantet.
I didnt say its the only possible reason, but it is certainly one of the reasons. A big one is also the lack of reward and security considering the effort. Lack of status is another, someone with an engineering degree with say the same amount of effort to get it as a law degree (say) has a far lower social standing. I was in the industry for 20 odd years so I do know a little about it and the above.
regards
I'm not sure where or when you studied at University but the idea of a student loan being 'free money' is laughable. Whilst you think my degree is useless, the world you describe sounds painfully dull. Give me passionate people with 'useless' degrees over doctors and lawyers lacking in social skills any day - think how boring the dinner parties would be without the arts, and I imagine some people would be particularly unhappy if they were denied anyone to look down on.
Think a little further, where does the energy come from to cook the food? your potable water to drink and wash up coem from? Where does your waste go to?
So get past "dull" there is essential and nice to have. "looked down on" well with the statement "how boring the dinner parties would be without the arts" you are doing just that.
BTW talking engineeirng isnt "dull" its fasinating but only to those how grok it. This doesnt mean I dont appreciate arts btw, my wife is a composer, just I have a different view point of whats interesting and whats dull.
Oh and finally consider how you are going to get on in an energy starved world that you will live most of your life in. Then consider just how useful are the quantity of journalists produced today for that future world.
I have a term for it, carrot pullers.
regards
1984 - 1989 at Auckland, BSC/MSC, major in Chemisrty. I run an overseas chemical company in NZ.
The student loan is free money to a degree. If interest was charged (as it should be) people might start thinking about what degrees they do.
I never have dinner and think about the arts, in the real NZ we usually are watching sport, drinking beer, taking the piss out of bludging students and maoris who are wasting our hard earned tax dollars.
Classy comment. maoris? I assume you were going for the plural of Maori which is Maori not maoris. If you are going to be an ignorant racist don't compound it with terrible grammar.
Also I note you were at uni when it was basically free and now you think current students should not only pay for their degree but pay interest on top.
Correct, it was free for me, yay. Not my fault is it? Interest needs to be paid, why not? I pay interest on my mortgage.
Maori's comment half tounge in cheek to wind the clientel here up. But, here in middle class NZ this is spoken about more than you imagine. Personally I don't give a toss about finer pionts of grammar. Not needed in my $150KPA occupatation.
There is no such thing as a useless degree. Knowledge is power. Blaming the sytem is appropriate when the sytem is a shambles....another example..
Yep it was near free, last free year also being 1989. Not my fault we had a different system then. However, I also had part time jobs in fast food, tutoring etc so I saved money! I got a useful degree in science (chemistry major). I did R&D/Quality Control and now I run the NZ Sales operation for a overseas based chemical company. I now pay over $40K PA in tax so I am paying back my free education.
These days, people know what they are in for when doing study. Debt has to be weighed up against job outcomes at the end of study. That is the current situation.
What does not help is the growth of education institutions wrt 20 years ago. You even need qualifications to be a security guard, 20 years ago all you needed was a pair of fists.
Frazz - you too could have had a "free" university education if your parents did as mine did, paid 66c cents in the dollar tax. No one gets anything free, its just that now days we get more of a choice as to whether we want to put neighbours kid through university or not. How many times do I hear this free education trotted out when comparing with student loans today, don't they even teach a bit of history to these kids at university now days ? Thank God then that I'm only paying for part of their education now.
We obviously don't know the details of the terms on which Elizabeth writes for interest.co.nz, but it seems to me that she's not getting much by way of guidance or training for a journalistic career out of it.
Shouldn't somebody have advised that this would make for a more interesting and useful piece of journalism if, instead of simply saying she doesn't understand something, she were to find out about it and write that up? Surely somebody at interest.co.nz has contacts at Inland Revenue that she could have talked to?
It's worth noting that Inland Revenue's has PAYE on their radar for a revolutionary change, as part of their IT upgrade. It might mean that PAYE is calculated on-the-fly and the Primary/Secondary tax code distinction will disappear.
In terms of student loan repayments: when I paid off my loan earlier this month, it was the biggest pay rise I've ever received (equvilient to a 17% gross payrise). Student loan repayments suck, and the sooner you can get rid of yours the better.
The problem for others is the RB sees your 33% rise and says (in effect) oh 10 ppl cannot get any rise at all.
So you I would assume wont be spending that on essentials like food and power, where those 10 probably would have.
Shows how distorted the economy is in a microcosm very well, and why so many economists are getting it so badly wrong......
regards
Um, well surely with the OCR. If they think average wage inflation is too high they put up the OCR. So someone with no wage increase gets hammered twice, once by goods increasing in price and then by having to pay extra interest caused by the RB?
So there is a difference between say everyone getting 5% and 1/2 getting 10% and the other half getting 0%, yet on paper it looks the same, 5%. RB puts up interest, that top 50% are still laughing, the bottom 50% in effect take a pay cut.
Hence deflation is getting a bigger and bigger issue that doesnt seem to be appreciated IMHO.
regards
Yes, student loan repayments suck - and indeed the quicker you can get rid of them the better. Which I assume is exactly what this Govt had in mind when they recently increased automatic deductions to 10% of gross income. The popularity fallout from reversing Helen's interest free decision would have been too high - so for National, it was so much easier to just require repayments at a rate which served to significantly increase the number of working poor.
Surely though it would be on the student taking out the loan to consider that they have to choose a career that will pay back the loan and not make them a pauper?
Or my understanding of the US systems is actually that the US Govn makes a comfortable profit, at least NZ tries to do it at as low as practical.
regards
Secondary tax is by far the most pernicious thing I've encountered as a wage earner. I see absolutely no point in it, or rather nothing that can't be easily overcome another way. It hits the people who can't afford it most - low wage earners and students who have to work more than one job to make ends meet. It's totally and utterly reprehensible.
Im a little lost here, so lets say you have one 40 hour job and earn 50k and pay (say) $15k tax.
So with 2 x 20 hour jobs paying 50k, well then you should only be paying $15k tax.
Are you saying you pay more than $15k just because you have 2 jobs? (all else being equal)
Now Ive not held 2 or more jobs since my time in the UK I'll admit but there was no difference there.
regards
Nope. With Student Loan, if your annual income from all sources is $14000 - $48000 the secondary rate is 29.2% (though people at the range are quite likely to get an added deducation, but that doesn't help at the time, only when it is all sorted out at the end of the year).
If you somehow get to the 48-70000 brackect with 2 jobs and a student loan, your secondary tax rate is 41.7%
All else being equal, with student loans (From the IRD website):
For the main job, Main job (gross earnings minus pay period repayment threshold) x 12% is the repayment deduction. ($520 minus $367) x 12% is $18.36. For the secondary job, Secondary job gross earnings x 12% is the repayment deduction. $100 x 12% is $12.
The threshold makes it rough if you income is split between several low paying jobs, the more jobs the worse.
I agree steven - Mark seems to think "secondary tax" is a separate tax that exists solely to overtax poor people. When in reality secondary tax codes are the way the PAYE system deals with people with two jobs, so they're taxed at the right level.
Without them, employees would end up with a massive tax bill at the end of the year!
Since people are taking an oppertunity to bag journalism, I feel I should point out that since we have found even fish use tools about the only thing that distinguishes us as humans is that we are storytelling animals, creating the meaning of our world.
Probably worth noting for those in the journalism area, the people beind the data journalism handbook:
http://datajournalismhandbook.org/1.0/en/
Are organising a free online course on data driven journalism that must be starting in the nearish future (early 2014)
http://www.datadrivenjournalism.net/course/
It really shows how much of an advantage it is to be in a couple with kids, rather than a single person with kids. If you are a in a couple, two people can be working part time for 40k each, earning a combined family income of 80k, but those two incomes would be each taxed at the 40k level for each person. Howver if a single person had two jobs earning 40k in each one, or a single job earning 80k, they would be paying more in tax than the couple would combined, due to them being taxed on the 80k rate.. At least that is the way I read it, which doesn't seem all that fair. But I guess it means that it pays to be in a couple.
Not really, only if in 2 poor paid jobs instead of one reasonably well paid one, to make ends meet. I think Peter Dunne? wanted a policy of tax per household, so if one stayed at home that unused tax bracket moved onto the working one and if ppl think being at home with kids is easy, oh boy I'd much rather have a "real" job.
regards
In my many and varied careers (none planned) I was the modern-day equivalent of a CFO for a large tertiary ed provider.
My main task was to convert the show into a bulk-funded, accrual-accounted organisation, from a legacy that essentially consisted of a massive, hidden, State funding component (property and salaries - that's 85% for starters), plus a few jam-jars, cash-accounted, and laughably described as 'discretionary spend'.
So I have an insider's view on tertiary funding and accounting, and I think you need to research a few things to understand some of the comments.
- What percentage of total course costs (properly cost accounted, which not all providers manage to do...) did your fees actually pay for? My SWAG is 25-35%, tops. The taxpayer picks up the rest.
- Have you heard of the 'Higher Education Bubble'? It's the now-common situation where education costs rise faster than general inflation, and at the same time, some course types have reached the top of their S-curve and their relevance (but not, of course their costs) is falling off. So some courses will never repay even their cost to the student, in personal earnings increment over a lifetime...the Bubble.
- The Process of education needs always to be distingusihed from the Content. Content decays - half-lives of most disciplines at present would be a decade or less. Process stays with you forever, but not all courses manage to convey, model or even be aware of it....
The test's on Friday.
Good insight... Waymad.
Add to the mix, Govt appears to be steadily removing funding from Polytechs & Unis, & encouraging TEC to reallocate funds/contracts to Private Training Orgs, so as to put the squeeze on the tertiary sector. And have more low quality unit standard "courses" "delivered" for unsuspecting students by PTEs who will have low quality quals. (but have been cheaper to deliver).
Elizabeth, there are some factors about your situation where you should think yourself very lucky. I am one of those unfortunate students that studied at university between 1996-2002 where we were actually charged interest on our loans.The interest charged on my student loan that was never written off (and my brother is in a similar position) was in the region of $30,000. I have paid off nearly $30,000 on my loan and it is still larger than the original amount drawn down. Students who started studying after 2003 are very very lucky. I have now just accepted that I have to pay a much higher tax than everyone else because of timing and circumstances.
Also, when I was a student working a second job the secondary tax rate was 50%. I don't envy you the poor work options available to you and the income - I was earning $70,000 as a recent graduate ten years ago.
Interest or not, every tertiary student should be compulsorily counseled face to face before being allowed to borrow 30k plus for a degree, which may or may not lead to a job. Students dont realise the loan is real money.
As for low level, certificates or diplomas [trades not included] these should not qualify for loans.
Yup, there's a huge discord between some people who think that it's 'free money' - it isn't. It's a ten percent pay cut for as long as you take to pay it off, and the quality of the education you get relative to international institutions is dropping as fast as the costs are rising.
It is unsustainable and the boom times only masked the problem because most people could find work after study. That is no longer the case.
My preference would be for something between the two. Something like interest-free for ten years, interest-bearing thereafter. Incentive to pay the thing off within shortest possible time-frame, but not overly punitive and long-term financially crippling for those who can't.
Downsides with this that I can see would involve pinning down details such as when your interest-free period begins and ends, does it re-set if you go back, that kind of thing.
Another option is to get your job first, then get your employer to fund your studies.
My employer paid my Masters fees & industry certs, while the friendly Aussie Govt gave me free fees for my PhD [this is available for all NZ citizens under Commonwealth scholarship]
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