2 weeks Ago
The Inland Revenue department has doubled the size of its team responsible for chasing down overseas-based student loan debt and is taking more legal action in both New Zealand and Australia. Overdue student loan debt has grown to a record $2.37 billion dollars - with $2.
2b of that owed by overseas borrowers - most of whom are based in Australia. Only 29 percent of all overseas student-loan borrowers met their repayment obligations in the past 12 months. Inland Revenue was allocated $116m in this year's Budget to bolster compliance and enforcement, with some of that ring-fenced specifically for overdue student loan debt.
The rest of the funding is being used across other areas of the tax system including cryptocurrency, trusts, the so-called hidden economy and organised crime. IRD's marketing and communications group manager Andrew Stott said young people heading overseas might not be aware their student loan debt was accruing interest and it could help set them up for "a bad track record of managing debt". However, most of the debt was owed by people in their 40s or 50s who had never got around to repaying IRD.
"It's a big problem." Debt collection agencies in the UK and Australia were helping to track some people down. Around 7000 names had been shared with an Australian debt agency in the first quarter of this year and as a result around 1000 people were now repaying some or all of their debt.
"And that's a big step up from past years." IRD was also in touch with the Australian tax office which will share contact details for those living in Australia. "Most of it is about contact and negotiation.
.. Once we're in contact with people we tend to come to good outcomes and that's where the data sharing with the Australian tax office is useful.
" For "the worst cases" Inland Revenue will take action through the courts to try and have money deducted from people's wages or salaries while they are working across the Tasman. Kiwis returning to New Zealand with a debt of more than $1000 could expect to hear from IRD. Previously, the department only had the resources to follow up about a quarter of those people, now it was resourced to make contact with all of them.
It can be escalated in some situations. There is a list of 150 people who IRD would seek arrest warrants for if they returned to the country, Stott said. This would mean they would be unable to leave the country again if they had not negotiated about their debt.
The amount they owed, the length of time and a total lack of engagement were among reasons people could be red flagged. About 10,000 of the 110,000 Kiwis who owed money returned to the country in any year, he said. "Some of the interest will reduce if they start setting up an arrangement to pay the outstanding debt over time.
We want to be helpful, we talk about the various options they've got to pay from overseas." Passport applicants could also find they could be hearing from the IRD. "So there's a whole range of ways that we try to get in touch with people who overstep.
" Stott said Inland Revenue was given an extra $4 million in this year's Budget for the work with the expectation of a four to one return expected, and eight to one next year. From July to September it collected $60m worth of overseas-based debt which was 50 percent better than the same period last year. Having an expanded team able to put more effort into finding people and social media searches (including LinkedIn) were among the tools IRD could use, he said.
Inland Revenue was also using property transaction data, and had clear information on whether properties were owned by individuals, a company or a trust. "We have launched hundreds of audits in the last quarter on property speculators and developers. "We've launched hundreds of audits on people who used to pay rental income and no longer do so despite the fact we can see they still own multiple properties.
" IRD had been in touch with 200 business owners who owned several properties, sometimes through trusts, and they were being told IRD would no longer be "cutting them much more slack" if they failed to pay money they owed. Those people owed more than $14 million and within a month more than $10m had been repaid or was under arrangement. Of 2000 audits undertaken in the first quarter, 10 percent involved the country's largest businesses, Stott said.
"So we spend a lot of focus at the big end of town." Liquor stores, vape stores, nail salons and hairdressers are also under scrutiny because IRD believed cash income was not being declared. "We've been doing unannounced visits to all these places.
...
They're generally been pretty happy to see us because they'll tell us about their competitors who they think are doing dodgy things and that gives us some more information to go on.".
