Dave Ananth reveals how new section 145A of the Student Loan Scheme Act works to resolve longstanding ballooned student loan debt owed by borrowers who are now overseas

By Dave Ananth*

Inland Revenue is pursuing overseas borrowers on a large scale. I have now seen the other side: once a borrower discloses their true financial position and makes a serious proposal, the new interest-relief provisions can turn an old paper balance into money recovered for the Crown.

Between the 2022/23 and 2025/26 financial years, Inland Revenue made 73,732 referrals of student-loan borrower files to overseas debt collection agencies. The figure comes from an Official Information Act response dated 18 August 2026, obtained by tax commentator Terry Baucher. It is a count of referrals, not necessarily 73,732 different borrowers. There may be repeat referrals. Even so, overseas collection is now being used on a large scale.

The same response records 24 warrants issued since the border-arrest provisions came into force in March 2014. Inland Revenue also confirmed that no judgments have been obtained against New Zealand-based borrowers for student-loan debt. The judgments it has obtained concern overseas-based borrowers, but it withheld their number and value because even aggregate information could identify individuals.

Inland Revenue could not provide the requested country breakdown for the files sent to collection agencies. Its records may show a last known address, but that does not prove the borrower still lives there. That answer should not be exaggerated into a claim that Inland Revenue has no idea where its borrowers are. It does show a basic difficulty with overseas recovery: people move, records age and contact are lost.

The OIA does not tell us how many of the 73,732 referrals produced payment, an arrangement or a completed settlement. Referral is activity. It is not a result. That missing outcome is the more important number.

In April, I argued that these provisions would not, by themselves, bring disengaged borrowers back into the system. I remain of that view. What practice since enactment has now shown is what can happen after contact is restored.

What the new law allows

Enforcement remains necessary. Borrowers took taxpayer-funded loans and are required to repay them. But enforcement alone does not answer the case of a borrower who finally comes forward with a balance that has been growing for 10, 15 or 20 years and wants to settle it.

Since 31 March this year, section 145A of the Student Loan Scheme Act 2011 has given the Commissioner a clearer power to deal with those cases. Where the statutory requirements are met, the Commissioner may write off as much ordinary loan interest as is equitable in the borrower’s circumstances after an amount has been agreed to repay the consolidated balance in full.

The word is may. Relief is not automatic and no borrower is entitled to a discount. Section 145A concerns ordinary loan interest. It does not simply wipe the original loan advance because the debt is old or the borrower has found it difficult to pay.

The different parts of the balance also matter. Section 146 deals with late-payment interest. That is not the same as a penalty. Penalties are dealt with under section 146A. Section 154(1A) permits an instalment arrangement for an agreed amount in the circumstances set out in that provision. Sections 138A and 141B provide that, if a borrower enters into an instalment arrangement under section 154(1A) and meets all their obligations under it, the Commissioner must cancel the loan interest calculated and accrued, and the late-payment interest charged, from the date the arrangement was entered into until the agreed amount was paid in full.

These provisions now give Inland Revenue a practical way to take a substantial payment, deal with the interest components and close an account that might otherwise continue growing on paper for another decade.

What I have seen in practice

I have now used the new provisions successfully in several matters. Several cases are not national data, and I will not pretend otherwise. They are enough to show that the law is not sitting idle. Inland Revenue will use it where the evidence and the proposed payment justify the result.

Every successful matter has started with the same step: the borrower came back into the system. They provided their present financial position, not selected parts of it. The proposal was supported by records and offered Inland Revenue a real recovery, not a token payment.

This does not solve the wider problem of borrowers who never re-engage. No statutory discretion can produce a settlement for a borrower who remains wholly disengaged. It does show what can be done once that person decides to contact Inland Revenue, disclose their financial position and deal with the debt.

There is no standard discount

I cannot publish the facts of the cases I have handled. A combination of the debt, occupation, country and travel history may identify a borrower even if the name is removed. The following example is hypothetical.

Assume a person borrowed $20,000 about 20 years ago. They remained overseas, missed repayments and accumulated ordinary loan interest and late-payment interest. The consolidated balance is now $130,000. Following full disclosure, Inland Revenue may agree upon an amount required to repay that balance in full and write off such interest as it considers equitable. The amount would depend on the borrower’s present income, assets, liabilities and realistic capacity to pay. There is no public percentage or standard reduction.

Someone with substantial income, property or investments may be required to pay considerably more than someone whose capacity is limited. Someone else may have no means of funding a serious proposal. The balance alone does not decide the outcome. The present facts do.

Why a settlement may recover more

Writing off interest is a concession. There is no point pretending otherwise. But calling every settlement a loss to taxpayers ignores the real question: how much was Inland Revenue likely to recover from that account if no agreement was reached?

The Government’s own material confronts that problem. Cabinet material released in June 2026 records approximately 113,000 overseas-based borrowers, with only 30 per cent meeting their repayment obligations. It says 90 per cent of overdue debt is owed by borrowers who have been overseas for more than 10 years. The Regulatory Impact Statement records about 50,000 borrowers overseas for more than 10 years with significant debts. For a significant portion, the expected recovery averaged only 14 per cent of the face value of their loans.

A balance appearing in myIR is not necessarily its recoverable value. If a borrower can make a substantial payment now, Inland Revenue may recover more by accepting a properly examined settlement than by leaving the account untouched and continuing to add interest. It may also avoid further collection and court costs.

That is not an amnesty. The borrower pays an agreed amount, often a substantial lump sum. Inland Revenue receives money that may otherwise have remained difficult to collect. The account is resolved and the borrower returns to compliance.

Full disclosure is the price of relief

A proper application should identify the consolidated balance and, where the records permit, separate the original advances, ordinary loan interest, late-payment interest, penalties, payments and credits. It should then set out the borrower’s income, assets, liabilities, dependents, essential expenditure, health or employment issues and the source of the proposed funds.

If family members will provide the lump sum, say so. If an asset can be sold or refinanced, disclose it. If instalments are proposed, the figures must show they can be maintained. Inland Revenue is entitled to check the information and ask for documents. In the matters I have handled, that is exactly what it has done.

Under section 145A, a write-off of ordinary loan interest may be reversed if it was granted because of false or misleading information supplied by the borrower. A borrower cannot ask the Commissioner to exercise an equitable power while hiding the very facts needed to make that decision.

The adviser’s job is not to invent hardship or demand a percentage reduction. It is to establish the facts, work out what can genuinely be paid and put forward a proposal Inland Revenue can accept as a proper recovery. Sometimes the honest advice is that the borrower should offer more.

Working with Inland Revenue

In the matters I have handled, Inland Revenue has applied the new provisions carefully. We have not always agreed at the start. That is ordinary negotiation. Officers have asked for disclosure, tested the proposal and considered the borrower’s current position. Where the recovery case has been made, they have been prepared to settle.

That is how the legislation should work. Overseas collection and court action create pressure to engage. The settlement provisions provide a way forward for a borrower who does engage. Relief without scrutiny would be unfair to taxpayers. Enforcement without regard to realistic recovery would waste time and money. Inland Revenue needs both tools.

For an overseas borrower, the message is simple. Do not assume the debt will disappear. Do not rely on another person’s settlement. Obtain your account information, update your contact details, disclose your circumstances and make a proposal you can honour. It is better to approach Inland Revenue before a collection agency, court proceeding or border warning forces the issue.

The 73,732 referrals show how far Inland Revenue’s enforcement program now reaches. The cases I have handled under section 145A show what can happen after contact is restored. When a borrower returns to the system and the evidence supports relief, a negotiated payment can put money into the Crown account now and close a debt that may otherwise never be recovered.

Sources

Legislation: Student Loan Scheme Act 2011; Taxation (Annual Rates for 2025-26, Compliance Simplification, and Remedial Measures) Act 2026.

Policy material: Regulatory Impact Statement: Student loan interest relief; Cabinet material: Commissioner discretion for overseas borrowers.

Official Information Act response 27OIA1074, dated 18 August 2026.

Acknowledgment: This article draws on OIA response 27OIA1074, obtained by tax commentator Terry Baucher and used with his permission.

*Dave Ananth is a principal at Meridian Partners, specialising in IRD disputes, enforcement, and student loan  and tax-debt matters. His background, profile and contact details are here.