Dave Ananth examines a proposed change to overseas student loan enforcement and asks whether the wording matches the Government’s stated target

By Dave Ananth*

Revenue Minister Simon Watts has identified his target: overseas student loan borrowers who deliberately avoid Inland Revenue communications. A change Parliament has been asked to pass does not expressly require deliberate avoidance to be proved.

The change appears in clause 230 of the tax Bill introduced on 10 September. It would widen the offence that underpins student loan arrest warrants. If enacted as introduced, the change would take effect the day after Royal assent.

The Minister’s announcement describes borrowers “deliberately avoiding Inland Revenue communications”. There is a difference between someone making themselves impossible to notify and Inland Revenue being unable to notify them. When arrest is a possible consequence, Parliament should be clear about which conduct it intends to catch.

Under section 162A of the Student Loan Scheme Act 2011, an overseas-based borrower in default commits an offence if, after notification by the Commissioner, they knowingly fail or refuse, by the specified deadline, to make reasonable efforts to pay or arrange payment. The maximum fine on conviction is $2,000.

Section 162B allows a District Court Judge to issue an arrest warrant on Inland Revenue’s written application if satisfied that the offence has been committed and the person is about to leave or attempt to leave New Zealand. A Registrar may act if a Judge is unavailable and the case appears urgent. A prior conviction is not required. Following arrest, the District Court can also make orders restricting departure if the statutory conditions are met.

Clause 230 would allow the offence to be established where the Commissioner has been unable to notify the borrower despite reasonable efforts. The borrower must have previously communicated with the Commissioner about the default and knowingly failed or refused to make reasonable efforts to pay or arrange payment.

That could make some warrant applications easier. It permits the underlying offence to be established without the notification required by the existing provision, if the alternative conditions are met. The separate warrant requirements remain. A large balance, a missed message or a return visit would not, by itself, be enough.

Consider a borrower who spoke to Inland Revenue ten years ago and now wants to visit New Zealand. What would that old call establish?

The clause refers to previous communication “on the default”. A conversation about the existence of a loan would not automatically satisfy that requirement. Inland Revenue would need to establish what was discussed and its connection to the default relied upon. The clause sets no express age limit on the communication, but its age and content would matter to what it proves. An old conversation alone would not establish all the offence and warrant conditions.

Borrowers should not assume that current law guarantees a fresh letter before each warrant application either. Section 162A contains no such express requirement. Section 211 also allows notification by telephone and qualifying electronic communication. A text simply asking someone to call is not necessarily notification of default with the required deadline; the actual communications must be examined.

Calling Inland Revenue is not itself the offence. Nor does a later call automatically undo an offence already committed. The legal question concerns knowing failure or refusal to make reasonable repayment efforts or arrangements.

There is a substantial collection problem. Inland Revenue’s figures put overdue repayments owed by overseas-based borrowers at $2.478 billion at 31 March 2026. A borrower who knows about a default and refuses reasonable repayment efforts should not be able to frustrate enforcement simply by evading notification.

But a failed attempt to notify does not establish why contact failed. Illness or disrupted living arrangements may explain it. Borrowers are obliged to keep their contact details up to date, and those circumstances do not automatically excuse default. Equally, they do not establish deliberate avoidance.

The regulatory analysis published with the Bill supplies an important part of the Government’s answer. Officials considered and rejected removing the knowledge requirement. Their preferred option retains knowledge as a safeguard while allowing reliance on earlier engagement.

That safeguard matters. This is not an offence established merely because Inland Revenue cannot find someone. But knowledge of a default and knowing failure to make reasonable repayment efforts do not necessarily establish deliberate avoidance of a subsequent notification. Those are different questions.

The notification requirement has a history. In its 2013 officials’ report, Inland Revenue told the Finance and Expenditure Committee that proving knowing default would require demonstrating receipt of notification. Parliament is now being asked to permit an exception to that position.

I would require deliberate avoidance of notification before this alternative route can be used. That would add an evidential burden. Officials could fairly say it substitutes one difficult question of proof for another. I accept that cost where the consequence may be arrest without the notification ordinarily required.

If Parliament intends the wider offence, the Minister should explain why earlier communication about a default and knowing non-compliance are sufficient even when the later failure to notify has an innocent explanation. The case for that wider reach should be made openly.

The deadline needs attention too. The existing offence gives the borrower a deadline in the notification. The proposed subsection specifies no replacement deadline, while referring back to the offence in subsection (1). How does that deadline operate when notification has failed? Parliament should specify when the alternative offence is complete and what reasonable opportunity the borrower must have had to act.

This is a question raised by the wording, rather than a conclusion that the provision cannot work. It should be resolved before a warrant application requires a court to answer it.

The evidence for the change also needs proper treatment. The regulatory analysis says Inland Revenue does not record cases where a warrant was not sought, although operational staff describe notification difficulties as recurring. Additional repayments have not been forecast because the behavioural response is uncertain. Officials propose monitoring engagement, repayments, warrants and arrests.

Those limitations do not prove the amendment will fail. They do mean Parliament should require the results to be published, with enough information to distinguish the amendment’s effect from other collection work. The test should include whether borrowers enter arrangements they can sustain and whether money is recovered. Counting warrants alone would tell us too little.

I would also want clear records of the earlier engagement relied upon: the default discussed, what the borrower was told and the opportunity given to respond. An old contact entry is only useful if it establishes something relevant.

There is a wider responsibility at the beginning of the loan. In my practice, borrowers describe avoiding their accounts after seeing balances they cannot reconcile with what they originally borrowed. Some need to return for a funeral or an ill parent and are frightened of enforcement. Those accounts do not establish a defence. They do give policymakers a reason to examine where understanding and engagement break down.

Section 13 already requires specified information in loan contracts, including the base interest rate and repayment percentage. I would like new applicants to receive worked examples showing how their proposed borrowing could develop if they move overseas or miss payments. The same explanation should reach borrowers when they leave New Zealand, when the consequences become immediate. Access to education must remain central; better explanation should help people manage the obligation they take on.

MPs should settle the scope of the notification exception and the point at which the offence is complete before passing clause 230. They should also require evidence of what it achieves. Parliament can strengthen collection while insisting on a precise account of who may be arrested and why.

*Dave Ananth is a partner at Meridian Partners and a former Inland Revenue solicitor. His practice focuses on student loans, tax disputes and negotiations with Inland Revenue. His background, profile and contact details are here.