Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill

That brings us to Part 2—that’s clauses 39 to 57 and Schedule 1.

Thank you. I was just ahead of the pack.

CHAIRPERSON (Hon Anne Tolley): You were.

The amendments to the Student Loan Scheme Act, set out in Part 2, are very extensive, actually. I think the issue around this, as I said before, is really one of making sure that there’s adequate flexibility for students. There’s a balance here between making sure that students can and do participate in the KiwiSaver schemes and also making sure that the arrangements are fair and also, when they cease to be students and move on to a period where they’re full-time earning, that the appropriate arrangements are in place to ensure that that is appropriately done so they make their contributions and all their student loan repayments as part of that requirement.

Some of it is dealt with in Part 2. Some of it is dealt with later in further sections. But I think the important thing here is the issue around the minimum deduction, which has been reduced from $1,500 to $500. I think that part of it is quite an important little aspect in terms of the ability of students to be able to manage their own affairs. This relates to an issue around—originally, there was a $1,500 threshold. It was introduced to reflect the compliance costs associated with the requirement to file a return for student loan purposes. But part of this bill reduces that to $500.

Also in new section 62A, in clause 45, the commissioner may now notify employers when loan balances are close to zero. This is the other bit I was talking about in terms of making sure there’s a transitional arrangement for when students have paid off their student loan and are, obviously, moving on in terms of their life. Previously, under the arrangements we had, often the employer would keep making a deduction against the person’s income, and, in many cases, this resulted in an overpayment by the employer on behalf of the student to repay their student loan. What section 62A does in particular is make sure and create the provision under, hopefully, the new system that’s coming into place to operate in a way that they can tell the employer that it should not be making a further deduction—so, in effect, giving pre-notification of the amount outstanding in terms of the student loan, so we get to a point where the employer is making the correct deduction at the correct time and stops thereafter.

That is a very important part, and I think it’s one of stopping all the compliance costs. It also stops all the hassle of that person who may have overpaid to the IRD to have to go and seek a refund and all the difficulty associated with that. So I think that is very, very helpful.

Again, it would be quite useful to hear from the Minister in terms of the operation of that—how that’s going to be managed. I know we’ve got a big Business Transformation programme coming through and working its way through and it’s assumed that the technology will give us that sort of—but it would be actually quite nice to know further details about how we are going to ensure that that is going to be carried out in a timely manner, prior to the last payment, and what arrangements and just any other aspects to that, because I think it is a very important part, especially when you get in the number of students that this will apply to.

I just want to take a brief call because I’m like the IRD and its old motto: “We’re here to help”. In clause 45, new section 62A, I think we may have a minor mistake, which we should have picked up on at the Finance and Expenditure Committee but which we haven’t. Let me try and point it out to the Minister of Revenue, and there may be a chance that if necessary, we can fix it at this committee stage.

For section 62A, the heading is “Commissioner may notify employers when loan balance close to zero”. First of all, I question why there’s a need for that. I would have thought it was necessary for the commissioner to not continue to accept contributions once the loan is in credit.

Then, further on, “(2) When [the] borrower’s consolidated loan balance … close to zero, the Commissioner may—(a) notify one or more borrowers … and (b) require the employer, [and the] employers, to reduce standard deductions” etc., so they don’t. Then, at 62A(3), “The Commissioner must give a copy … to the borrower.”—and we’ve removed the bit: if a valid address to the borrower is found.

My concern is what happens if you don’t know where the borrower is, and I presume that’s why we’ve removed the words “if a valid address to the borrower is found.”

And then further, at 62A(3A), it does not apply if “he or she has incorrect contact details for the borrower [and] cannot reasonably locate the borrower.” So I’m just confused as to what the obligations then are to the commissioner in regards to the borrower of the student loan and to the employer. So just a bit of clarification around that from the Minister would be helpful as to whether we’ve made a mistake with the “mays” and the “musts”—that’s, basically, my question.

A couple of points—I don’t think we’ve made any mistakes at all. First and foremost, the student loan scheme has been around, I understand, since 1992. I think you’ll find that the vast majority of people who have student loans—to Mr Bayly’s point—but are also gainfully employed are part of KiwiSaver. They understand the rationale behind KiwiSaver and they’re contributing to KiwiSaver as well as meeting their loan repayment obligations as good Kiwis and someone who has signed a binding contract with the Government. So I don’t have any difficulty with this.

The second thing I will say is I would make a recommendation, if I may. Business Transformation and the process that it is going through to enable Inland Revenue (IR) to gather so much more information to better serve Kiwis is quite complex, but the overarching theme behind Business Transformation is data that IR can use to improve the integrity of the tax system but also provide a much better service to New Zealanders. I would make a recommendation—I know the chair of the Finance and Expenditure Committee (FEC) isn’t here—if you have any really technical issues with the whole Business Transformation project, I know the Commissioner of Inland Revenue is always welcome to appear before the FEC and answer a lot of those details, and I know that as each release comes close to fruition, she is more than welcome to come in and brief the select committee.

💬 Rt Hon David Carter: And she has done, and she’s very good.

And she has done. I’m well aware that she has always replied or taken up any invitation that has been issued by the FEC.

In terms of the Rt Hon David Carter, you’ll note in the clause that you read out there it talks about “reasonably”—what the commissioner can reasonably be expected to do. Now, what we do know is that Kiwis move, and it is actually the borrower’s or the taxpayer’s obligation to provide and update their information to Inland Revenue. So it’s not Inland Revenue’s obligation to keep chasing up the borrower for current details. Why we have a reasonable test in this is because certainly when Kiwis—you know, they go from their student flat, they go back to wherever they’re heading to, and then they head overseas; and, as we know, many Kiwis, they go from flat to flat to flat. I don’t think that we would expect Inland Revenue to expend an inordinate amount of money or time trying to chase Kiwis that they can’t. But, as mentioned, it is actually the obligation of the borrower to make sure that their information is correct. That’s why we have a reasonable test there.

In terms of “may contact the employer”, again, I think you may well find that a lot of student loan borrowers, when they get close to the point of paying off their loan, are well aware of what their obligations are and how much they need to pay. In fact, I know a number who have held celebratory drinks as the last dollar goes into the Government to pay off their student loan. They may well contact Inland Revenue themselves just to make sure they’ve got the balance exactly right. So I suppose this is Inland Revenue again being proactive if they feel the need to be proactive in a situation where perhaps the borrower hasn’t been proactive themselves. So we don’t want to place an undue obligation or reach a point where there is undue duplication. That’s why you’ve got the “may” versus the “must”. But, again, I come back to that reasonable person test, I suppose: Inland Revenue will do all that they possibly can—and, I think, that we would expect of them—to ensure that the obligations of the borrower are met. But they’re not going to chase people to the ends of the earth if, in fact, that’s just a complete and utter waste of time. But I would go back to the point that it is up to the borrower’s obligation to provide Inland Revenue with the correct information. I hope that’s answered your questions.

The question was put that the amendment set out on Supplementary Order Paper 453 in the name of the Hon Stuart Nash to Part 2 be agreed to.

Amendment agreed to.

Part 2 as amended agreed to.

Part 3 Amendments to other enactments