23 Nov 2012

IRD plans court action for ex-students in Australia

8:43 pm on 23 November 2012

New Zealand's Inland Revenue says taking legal action against former students in Australia who refuse to pay back debt is a last resort.

The department says 14 people living in Australia have continued to ignore repayment obligations and plans to pursue them through the Supreme Court of Australia once approval is obtained in New Zealand.

As well as issuing bankruptcy orders, the IRD says it will attempt to get the money back through charging orders, garnishee notices, distress warrants and seizing assets.

Collections manager Richard Owen says some borrowers are adamant they won't pay and are leaving the department with little choice.

"What's important is the legal action we're taking is actually a last resort. These are folks who we've actually been in contact with, we've had conversations with them, we've tried to talk with them regarding their financial affairs, whether they're in a position to pay - given them the whole range of options.

"But these are people who've simply said no, we're out of sight, we're out of mind - you can't touch us, we're overseas."

The department is also in the final stages of hiring private agencies to act on its behalf in overseas cases.

IRD has collected $42 million from overseas-based borrowers from October 2010 to the end of October 2012.

New Zealand Union of Student Associations president Pete Hodkinson says he hopes people who default don't give the IRD an excuse to make repayment rules stricter for all borrowers, as that could be regarded as punishing the people paying back their debt on time.

"I'd be the first to acknowledge that there are those who take advantage of the scheme and if we can get all those people to pay, then great. Because chiefly, it's their behaviour which is used to justify increased loan repayment rates, dropping more student support (and) allowances.

"But what we don't want is people who aren't those severely recalcitrant borrowers to get caught up in the fray."