Inland Revenue vested with new powers to direct debit banks accounts for unpaid student loans, child support and working for families

Tax avoiders, student debt dodgers and parents behind on child support payments will see bank accounts with surplus balances direct debited under new legislative powers granted to the Inland Revenue department.

The new rules allow Inland Revenue to collect unpaid debt by instructing banks to take it directly from the bank accounts of individuals owing. Banks that do not comply with the orders face having their own accounts raided as a result or else prosecution.

The clamp down will also apply to recipients of Working for Families payments. Where an assessment of an overpayment has been made, joint accounts of either parent can be debited to ensure repayment is made. 

Any account, including a term deposit that hasn't yet matured, can potentially be accessed. Money will not be taken from accounts if it will have the effect of putting the account into overdraft however it there is evidence of money being transfered to avoid collection, that money can be seized in transit.

According to a tax summary issued outlining these new powers, Inland Revenue suggests this new hard ball approach to collection is a last resort to be exercised failing the exhaustion of all other methods.

"The decision to take any debt collection action, including the use of a deduction notice, is made only after consideration of all relevant information, including any previous communication between the department and the taxpayer, the amount and the age of the arrears and any known hardship or hardship likely to be experienced by the taxpayer."

Where the full amount owing can not be collected, banks will be instructed by make lump-sum withdrawals until the entire amount owing has been repaid to Inland Revenue. 

The direct debits can also be made to cover "daily interest which starts on the date of the deduction notice and ends on the day on which the amount required to be deducted has been deducted.'' A notification to that effect would be made in the "deduction notice'' in the first instance.

Banks themselves will be first in the firing line for failing to make the collection.

"If the deduction is not made by the bank, the amount required to be deducted is recoverable by Inland Revenue from the bank as if it were payable by that bank,'' the tax department states in the summary.

Any "deduction notice" issued from the end of April this year on-ward will be subject to bank withdrawals.