Deductions from Student Allowances

Currently, the following deductions are provided for in legislation, and therefore when a deduction notice is received, it must be followed - subject to the 'protected earnings' provisions described below:

• Child Support - section 154 Child Support Act 1991
• Income Tax Arrears - section 157 Tax Administration Act 1994

These deductions are over and above the standard tax deductions required from taxable Student Allowance payments.

MSD is not required by legislation, and therefore does not make the following types of deduction:

• a Debt Repayment Order made under section 344 Insolvency Act 2006 - the Ministry is not an 'employer' for Student Allowances purposes under that provision
• a civil debt established as an Attachment Order under section 155 District Court Act 2016
• a court fine established as an Attachment Order under section 155 District Court Act 2016

In addition, when a student asks MSD to deduct an amount from their Student Allowance and pay it to a third party (and MSD is not required by legislation to make that deduction), they should be advised to arrange this payment through their bank.

Deductions sometimes include what are known as a 'protected earnings' requirement. Protected earnings are the portion of the payment that is protected from any deduction.

This mechanism is used to ensure the recipient of the payment is not unfairly disadvantaged by a deduction.

This will be either be specified in legislation or detailed in the policies of the relevant agency.

MSD has both the legislative authority and obligation to recover debts incurred by clients while receiving payments from MSD.

For more information see:

Certain forms of deductions take priority over others. The following list sets out the order of priority, highest to lowest:

• Child Support under section 157 Child Support Act 1991
• Inland Revenue deduction notices
• all MSD debt repayments (with Student Allowance and then Student Loan MSD debt having the highest priority within this category)

• Converting all or part of a loan into an MSD debt

Determining the priority of deductions is necessary when a client has more than one order issued in respect of their Student Allowance.

If the deduction amount needs to be reduced, then deductions will be made in order of priority from the lowest to highest priority deduction, taking into account the protected earnings rules for each type.

For example, when a client has both Child Support and MSD debt deductions, when MSD debt deduction would reduce the Student Allowance payment to below the Child Support protected earnings amount, the Ministry deduction would be reduced, not the Child Support deduction.

This is because Child Support deductions take priority over MSD debt deductions.