Inland Revenue taking tougher line on student loan debtors
Inland Revenue is taking a tougher stance on overseas-based student loan defaulters, including border arrests.
More than 70% of 113,733 overseas borrowers are in default, owing $2.3 billion.
Since July, Inland Revenue collected $207 million, a 43% increase, from overseas borrowers.
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The arrest of a person arriving at the border last month over unpaid student loan debt is an example of Inland Revenue “making up for lost time”, one tax expert says.
Inland Revenue said at the end of April there were 113,733 people with student loans believed to be based overseas. More than 70% were in default on their loans, owing $2.3 billion, of which more than $1b is penalties and interest.
For about 24,000 of these overseas-based borrowers, the debt is more than 15 years old.
Inland Revenue has been taking a tougher line, including arrests at the border as a “measure of last resort”.
“New Zealand Customs informs us of any border crossings into New Zealand by overseas-based borrowers and airlines provide the travel information to us. We apply to the district court and the police make the actual arrest,” spokeswoman Jane Elley said.
“Once arrested and taken before the courts, a judge can order the defaulter to make reasonable efforts to arrange repayment to Inland Revenue.”
Since July 1 last year, 89 people had been told they could be arrested at the border. Eleven had taken action by either making acceptable payments, entering repayment plans or applying for hardship provisions.
“One person was arrested at the border last month and they have since paid off their debt.
“There are just over 150 overseas-based borrowers, with a combined default of $15m, who we actively look out for in case they return to New Zealand.”
Elley said Inland Revenue had collected more than $207m in repayments since July last year from student loan borrowers living overseas – a 43% increase on the same period the previous year.
Inland Revenue had an increase in student loan compliance funding in last year’s Budget.
“We’ve contacted more than 12,000 borrowers, 1320 have entered repayment plans, and 960 people have fully repaid their overdue amounts. They have collectively repaid $9m,” Elley said.
She said the department was also looking at borrowers who owned property in New Zealand. There were just over 300, she said.
“During the first six months of our increased compliance work they paid up $1.7m. For defaulters within this group who have refused to engage and resolve their default, further legal enforcement action will be taken, which may include NZ-based bankruptcy or charging orders over their properties.
“There were also 151 [borrowers] with NZ-based investments, and between July and December last year we received payments totalling $84,000 from some of them. Again, there could be legal action ahead, including taking deductions from their investments or bank accounts receiving interest income.”
Robyn Walker, a tax partner at Deloitte, said it was another example of where Inland Revenue had been dormant for a while and was now making up for lost time.
“In the past there has seemingly been very little effort applied to contacting overseas-based student loan defaulters, and ... many of them ... probably were blissfully unaware of mounting repayment liabilities, penalties and interest if Inland Revenue had difficulty contacting them.
“We’ve periodically heard the stories of borrowers being arrested at the border, and it’s actions like that which can really spur people on to get on top of their obligations.
“No one wants to not be able to come back to New Zealand for a special event or family emergency because they’re concerned that their student loan will catch up with them.”
Secure your homes over summer
Police are reminding people to keep their homes secure during the summer months.
Inspector Glenda Barnaby, Christchurch Area Prevention manager, says daytime burglaries are just as common as nightime burglaries.
“Burglaries can be committed at any time of the day, and coming into warmer months there is more opportunity for thieves."
"Although a majority of burglaries involve forced entry through windows and doors, we are starting to see more incidents at insecure premises. Police deal with cases where burglaries are committed in broad daylight, sometimes even while the victim is at home. Good weather means open doors and windows, which makes homes more vulnerable to burglars.”
Inspector Barnaby says there’s a few things people can do to reduce their changes of a burglary being committed.
⚠️ If you’re going outside for gardening, relaxing in the sun, or working in the garage, take a moment to lock your doors and secure your windows first.
⚠️ Do the same at night when you go to bed - keep your doors and windows secure and close your curtains. Fitting window stays means you can get a breeze coming through, while keeping your windows secure.
⚠️ Get to know your neighbours - let them know if you’re going away and look out for one another.”
If you see any suspicious activity, people or vehicles in your neighbourhood, don't hesitate to contact Police.
If you witness or suspect any illegal activity, please call 111 if it is happening now, or make a report through 105 either online or over the phone, if it is after the fact.
What sectors are barely paying more than minimum wage?
While New Zealand might have about a dozen sectors paying at least a median $100,000 a year, there are almost as many paying barely more than the minimum wage.
Data compiled by Infometrics showed the median and mean salaries across industries throughout the country.
The data does not adjust for hours worked, and some of the workers may not be working a 40-hour week.
But it shows that on an annual basis, many sectors were not delivering incomes that were equal to the minimum wage.
The minimum wage of $23.50 an hour works out to just under $49,000 a year for a full-time, 40-hour a week worker.
Fuel retailing was paying a median of almost exactly the same amount.
Food retailing was paying less, at $45,030. Accommodation was slightly more, at $49,240, and food and beverage services was significantly less at $40,170.
Also within $10,000 of minimum wage were "other store-based retailing" at $53,220, sport and recreation services at $53,350 and personal and other services at $54,170.
Ministry of Business, Innovation and Employment data last year showed that about 141,900 people would be directly affected by the minimum wage rising to $23.50, indicating they were at that point being paid less than that amount per hour.
Infometrics principal economist Nick Brunsdon said skills and experience explained a lot of the variation in incomes.
"Industries that need a more skilled workforce generally pay more - because they can get a lot of value out of their workers, and workers need a good incentive to gain those skills - for example, medicine. Industries that take in a lot of lower qualified staff, like hospitality, can get away with paying a lot less, and still get plenty of job applicants.
"There are other factors like desirability - some jobs might not have a high skill requirement but are somewhat undesirable - say underground coal mining - so higher pay is necessary to find workers."
CTU policy director and economist Craig Enney said "hours adequacy" was a big problem in many sectors.
"You've got someone who's working 20 hours a week or 25 hours, on $25 an hour, so you're earning $500 a week. Is that enough? No.
"The challenge is often about the structure of employment in some of those sectors…In hospo, in retail, in catering, in a range of other sort of service-based industries, it's wanting more hours and not getting it."
The latest labour market statistics showed the the number of underutilised people in the country had risen to 403,000.
"These are people who want more hours, want more work and can't get it. And that may be a key reason why, you know, total incomes are so inadequate for some people. And that's also partially helping to explain why the headline unemployment rate is not rising as quickly as some people had predicted."
Jake Lilley, a spokesperson for financial mentor network Fincap, said it was something mentors dealt with.
"They also help people work out what is realistic in terms of taking on hours while balancing additional childcare costs. Our latest Voices reporting recorded 31 percent of those supported by a financial mentor as having a mix of income from salary or wages as well as income support.
"It is a real juggle to navigate finances when unpredictable sporadic hours of work need reporting to Work and Income in what can be impractical timeframes. An example might be someone being asked to stay on for a longer shift by their manager and being unable to contact Work and Income when that day is the deadline to report other income.
"Someone might also not know exactly what their pay will be until a payslip is provided after the reporting date. Such situations can often result in overpayment debts from Work and Income compounding the difficulty of administering already tight finances."
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