Overseas debt among students has risen to a record $2.37 billion, of which an estimated $2.2 billion is owed by borrowers living offshore, the majority residing in Australia. In response to this, the IRD has more than doubled the size of its specialist staff and has increased legal action in New Zealand and across the Tasman to enforce more rigid repayment.
The IRD has been given $116 million in funding, some of which is used to collect overdue student loan debt. This funding also targets non-compliance in other areas, like cryptocurrency, trusts, hidden income, and organised crime. IRD, now collected from other sources, can trace those defaulters with much more facility.
Just 29 per cent of overseas student loan borrowers repaid their loans in the last year. Most of those who have left New Zealand are young people who may be unaware their loans accrue interest. Some of the debt is held by people in their 40s and 50s who have not yet begun repayments.
The IRD has engaged the services of UK and Australian debt collection agencies to track down and contact defaulting borrowers. It recently supplied 7,000 names to an Australian agency, which saw around 1,000 borrowers start paying. The IRD also has a data-sharing agreement with the Australian Tax Office, which supplies current contact details for New Zealand borrowers who are living in Australia.
The IRD could further take court action for the most serious cases of those borrowers who are working in Australia. Lastly, any Kiwi coming back home with more than $1,000 outstanding student loan debt will hear from the IRD since the department is now capable of following up with all returning borrowers.
In extreme cases, the IRD has arrest warrants for those owing extreme amounts who have shown no intention of paying. Those people would not be allowed to leave New Zealand again until the debt is paid.
Apart from direct contact, the IRD is using social media searches and data on property transactions, to track down debtors and evaluate the ownership structure of the assets. Property audits have become more aggressive with a focus on landlords who do not declare their rental incomes. Businessmen operating several properties or multiple income streams have also been put under higher scrutiny.
This proactive approach has already yielded significant dividends with $60 million collected from overseas-based debt between July and September-50 per cent more than the same period last year. Building on the investment in more resources and increased enforcement, IRD is confident of a strong return on the Government’s investment estimated to be at least four times the cost this year, and up to eight times in the next.
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