Part 1
Amendments to principal Act
Clause 4 replaces the definition of total interest rate in section 2. The current definition refers to a rate prescribed by regulations. The new definition sets out the formula by which the total interest rate for a tax year is to be determined. The repeal of section 87(1)(ab) and (ac) in clause 26 and the revocation of the Student Loan Scheme (Interest Rates Formulas) Regulations 2006 and the Student Loan Scheme (Total Interest Rate) Regulations 2009 in clauses 31 and 32 are all consequential upon this amendment.
Clause 5 amends section 14 in order to ensure that if a borrower is overseas based for part of a tax year, only the income that that borrower derived during the part of the year that the borrower was New Zealand based is used when determining that borrower's income-contingent repayment obligation for that tax year.
Clause 6 makes 2 consequential amendments to section 19 that are required because of the amendment made in clause 7.
Clause 7 inserts a new section 20A. This provision allows the Commissioner to issue an increased repayment deduction rate notice that applies to a specified borrower and, for that borrower, increases the standard deduction rate (which is 10 cents in each dollar) up to a maximum rate of 15 cents in each dollar. The Commissioner can only take this action if the amount of the borrower's repayment deductions is, or was, less than the amount required under the Act, or if the borrower has failed to pay any amount that has become due and payable in accordance with the Act.
The notice must specify the total amount payable by the borrower and is sent directly to the borrower's employers (with a copy going to the borrower). The borrower's employers must make repayment deductions at the increased rate until those repayment deductions equal the total amount payable by the borrower, or until the Commissioner notifies the employers otherwise.
Clause 8 is a consequential amendment required because of the amendment made in clause 14.
Clause 9 is a consequential amendment that is also required because of the amendment made in clause 14.
Clause 10 amends section 38AE. First, it amends section 38AE(1)(b) to make it clear that a borrower can only obtain the benefit of that provision if the charitable organisation for whom the borrower worked was named in regulations made under the principal Act at the time when the borrower did that work.
Secondly, it creates a new exemption under which certain borrowers can obtain a full interest write-off if they were personally absent from New Zealand because they were in 1 or more of Niue, the Cook Islands, Tokelau, or the Ross Dependency. Two other amendments are made to section 38AE as a consequence of this amendment, which also ties in with the amendment made in clause 13.
Finally, it inserts a new subsection (9), which provides that the new exemption has effect from 31 March 2009.
Clause 11 amends section 38AEA, which sets out the conditions for certain borrowers to receive a full interest write-off if they are doing voluntary work in a country that is recognised by the United Nations as a developing country. The United Nations does not maintain a list of developing countries. Therefore, this amendment changes the way in which the appropriate countries are identified in section 38AEA by referring to countries listed on the Organisation for Economic Cooperation and Development's list of countries receiving development assistance.
Clause 12 makes a consequential amendment to section 38AI(d) that is required because of the amendment made in clause 14.
Clause 13 inserts a new section 38AIA, which sets out the conditions for certain borrowers to receive a full interest write-off if they were personally present in 1 or more of New Zealand, Niue, the Cook Islands, Tokelau, or the Ross Dependency for a period of 183 or more consecutive days after 31 March 2009.
Clause 14 inserts new section 38AJA, which sets out an exemption, and the conditions for certain borrowers to receive a full interest write-off if they are undertaking full-time study overseas under a formal exchange programme or as part of a formal agreement between a New Zealand tertiary education provider and an overseas tertiary education provider.
New section 38AJA has effect from 31 March 2007.
Clause 15 contains a consequential amendment required because of the amendment in clause 14.
Clause 16 inserts a new section 38AM, which reduces a borrower's interest to zero for specified periods if that borrower fully repays his or her loan balance within a specified 183-day period.
New section 38AM has effect from 31 March 2006.
Clause 17 corrects a mistake in punctuation in section 44(1)(d).
Clause 18 corrects a threshold in section 51(3)(a) by changing it from $333 to $334. This threshold concerns situations where the Commissioner may refrain from collecting payment of a repayment obligation.
Clause 19 amends section 54, which relates to the Commissioner's ability to grant a borrower hardship relief. Currently hardship relief can only be granted for the current tax year, the next tax year, and the tax year immediately prior to the current tax year. This amendment allows hardship relief to be granted for any prior tax year.
Clause 20 substitutes new sections 55 to 55B. This amendment is related to the amendment made to section 54 by clause 19. New sections 55 to 55B set out the conditions that must be met before the Commissioner may grant hardship relief to a borrower and also specify the varying nature of the hardship relief that may be granted depending upon whether that relief is sought for a prior tax year, the current tax year, or the next tax year. New section 55 concerns hardship relief for any tax year prior to the current tax year. New section 55A concerns hardship relief for the tax year immediately prior to the current tax year. New section 55B concerns hardship relief for the current tax year or the next tax year.
Clause 21 amends section 55C. The amendments change 2 cross-references to section 55 and are consequential to the amendments made in clause 20.
Clause 22 amends section 55D. The amendment changes a cross-reference to section 55 and is consequential to the amendments made in clause 20.
Clause 23 amends the heading to section 56 so that it better reflects the contents of that section.
Clause 24 amends section 60A. That section provides for the cancellation of interest on a borrower's outstanding IRD loan balance if that loan balance is repaid early. The amendment changes the period within which a borrower must pay that loan balance in order for that section to apply, from 15 days to 30 days.
Clause 25 makes 4 consequential amendments to section 65A that are required because of the amendments made in clauses 13 and 14.
Clause 26 repeals section 87(1)(ab) and (ac). The regulation-making powers in those provisions are no longer required because of the amendment made to the definition of total interest rate by clause 4. The revocation of the Student Loan Scheme (Interest Rates Formulas) Regulations 2006 and the Student Loan Scheme (Total Interest Rate) Regulations 2009 in clauses 31 and 32 are also related to this amendment.
Clause 26 also repeals section 87(1)(b) because the section to which this paragraph refers has been repealed, and consequently amends section 87(4).