Remedial issues

Sharing borrowers' contact details with other agencies

(Clauses 10 and 11)

An information-sharing agreement was announced as part of Budget 2013, that would allow the Department of Internal Affairs to provide contact details of borrowers received from passport renewals. This sharing was to be limited to contact details of borrowers that are in default of their loan and not those who are compliant. This is because the Student Loan Scheme Act 2011 does not explicitly allow for sharing of contact details of borrowers who are not in default.

Obtaining accurate contact details is crucial for increasing the compliance of overseas-based borrowers. For borrowers who are not in default, obtaining accurate contact details will help Inland Revenue to prevent these borrowers from falling into default. With accurate contact details, Inland Revenue can educate borrowers about their obligations and put early interventions in place.

The proposed amendment enables the Commissioner of Inland Revenue to obtain the contact details of borrowers who are not in default. This will enable Inland Revenue to amend the information-sharing agreement with the Department of Internal Affairs to include borrowers not in default.

Application date

The amendment will apply from the date of enactment.

Alignment measures

The definition of “income” for student loan purposes

(Clause 13)

The definition of “income” for student loan purposes is largely based on the definition used for Working for Families tax credits. The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill introduced recently makes some changes to the formula used to calculate company income for Working for Families purposes.

The amendment proposed in this bill aligns the definition of “income” for student loans with the changes to the definition of “income” for Working for Families. The formula will be simplified so that dividend income is subtracted as part of the formula rather than subtracted in a separate section. This ensures that dividend income from a close company is not counted twice as income of the borrower. A second amendment also proposed to clarify that income from the formula cannot be a negative amount.

A further amendment also proposes to clarify that only living settlors should be counted when determining the numbers of settlors for a borrower’s trust.

Application date

The amendments will apply from the date of enactment.

Reduced late payment interest

(Clause 7)

Under section 157 of the Tax Administration Act 1994, Inland Revenue can take deductions from money payable to a taxpayer who is in default (for example, deductions directly from salary and wages). This includes student loan default payments. Individuals subject to a deduction order for tax debts are relieved of some late payment interest.

At present, the legislation provides a different treatment for student loan borrowers as there is no reduction in late payment interest when a loan is under a deduction order. The proposed amendment makes the treatment of late payment interest for student loans consistent with the treatment for tax debts, and reduces the late payment interest charged on overdue student loan obligations by 2 percent when the debt is under a section 157 deduction order.

Application date

The amendment applies from 1 April 2013.

Minor technical amendments

Clause 12 clarifies that Inland Revenue may disclose information to StudyLink (which administers student loan applications) to verify that an applicant for a student loan does not have an unpaid amount on their student loan that makes them ineligible for a student loan.

Application date

The amendment will apply from the date of enactment.

Clause 5 corrects a drafting error in the Student Loan Scheme Amendment Act 2013 that caused changes to payment dates for GST six-monthly GST filers to apply only for the 2012–13 tax year. This amendment corrects the error so it applies for the 2013–14 tax year onwards.

Application date

The amendment will apply from the date of enactment.

Clause 4 clarifies the treatment of deductions for borrowers who are in default only. Under the current Act, deductions made for borrowers whose entire loan balance is in default cannot be used to offset the borrower’s default. The proposed amendment allows deductions to be used to offset the borrower’s default.

Application date

The amendment will apply from 1 April 2012.