Dunne Peter: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
Dunne Peter: Student Loan Scheme Amendment Bill (No 2) — Second Reading 
[Volume:638;Page:8153] 
Hon PETER DUNNE (Minister of Revenue) 
: 
 I move  
That the Student Loan Scheme Amendment Bill (No 2) be now read a second time 
. The purpose of this bill is twofold: first to remove the barriers to borrowers overseas who are returning to New Zealand and second to ensure that borrowers receive their correct entitlements under the Act. 
The bill aims to encourage greater compliance amongst overseas borrowers by making it easier for them to meet their student loan obligations. In doing so it also helps to remove a potential disincentive to skilled New Zealanders returning home. Briefly the main changes for overseas borrowers as a result of this bill will be a repayment holiday of 3 years for borrowers who go overseas in recognition of the fact that it is not always easy for people to repay their loans while doing their OE and working in holiday jobs. The effect of that change will be that borrowers will not have to make repayments although their loans will still attract interest. For overseas borrowers who are not taking a repayment holiday the bill introduces progressive repayment obligations based on the size of their loan balances. For many borrowers who are overseas that will mean annual repayment requirements are lower than they are under current law. 
Interest-free loans for people who are studying overseas will be extended to undergraduates who are studying full-time at bachelor’s degree level. That does not mean that people will be able to take out a loan for study that is undertaken overseas. Rather it means that any existing loan they had before leaving New Zealand will be interest-free while they are studying. 
The amnesty on penalties declared last year for non-resident borrowers who are in arrears with their payments will be extended by 1 year to 31 March 2008. That will allow borrowers who are identified in the proposed data-matching between the Inland Revenue Department and the Customs Service to come within the amnesty. 
The second group of changes contained in the bill applies to all borrowers whether in New Zealand or overseas. Their purpose is to update the legislation so that it is consistent with the intent of the interest-free student loan scheme provisions that came into effect from April last year. Let me recap those changes briefly. First data matching between the Inland Revenue Department and the Customs Service will be introduced making it easier than it is at present for the department to identify who is overseas and to ensure that only those entitled to interest-free loans receive them. Second the late-payment penalty will reduce from 2 percent a month to 1.5 percent a month. Third the hardship provisions in the Student Loan Scheme Act are being amended to give the Inland Revenue Department greater flexibility in administering them. 
Collectively the changes to the overseas borrowers’ rules and the changes to the way the student loan scheme is administered will make it easier for borrowers to comply with their loan obligations and for the Inland Revenue Department to administer the scheme fairly. The changes will also go some way towards removing the disincentive for skilled New Zealanders to return home. 
In bringing the bill to its second reading the Education and Science Committee has reported that the majority of the submissions it received supported the proposed changes to the student loan scheme believing them to be a significant step forward in improving the overall functioning of the legislation. With that in mind the committee has made some important recommendations. The first of those is for a new amendment specifying that in order for overseas borrowers to qualify for an interest-free loan on the basis that they are working overseas as volunteers or for token payment as an employee of a charitable organisation they must establish that the organisation applies its funds to one or more specified purposes. Those purposes include the relief of poverty or of the effects of war or disaster and the raising of economic or educational standards in a developing country. The second recommendation relates to an amendment to the Tax Administration Act to ensure that care and management provisions apply to the Student Loan Scheme Act in relation to interest. That legislation currently applies in the case of repayment obligations. The amendment will ensure that there is an adequate basis for correcting any balances that may be in error as a result of a miscalculation and is important to the Inland Revenue Department’s ability to protect the integrity of the tax system. 
I would like to thank the committee for its expeditious consideration of this bill which I now have great pleasure in commending to the House.