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The BulletinMay 14, 2025

Crackdown on student loan defaulters steps up with border arrests and penalties

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As the government chases billions in unpaid student debt, new funding has empowered Inland Revenue to get tough on debtors overseas and at home, writes Catherine McGregor in today’s extract from The Bulletin.

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Loan defaulters face increased enforcement

Last month, a student loan defaulter was arrested at the New Zealand border, a rare move by Inland Revenue (IR) that signalled a new phase in its crackdown on overseas-based borrowers, sometimes referred to as OBBs. According to IR, more than 70% of the estimated 113,000 student loan OBBs are in default, with $2.3 billion outstanding, much of it in penalties and interest.

While arrests remain a “last resort”, they’re likely to continue as IR gets tougher on student borrowers who have stopped paying off their loans while overseas, reports RNZ’s Susan Edmunds. IR is actively monitoring the border for 150 borrowers with a combined default of $15m, and 89 people have been informed they may be arrested upon arrival. Legal action is also being used against those with assets in New Zealand, potentially including bankruptcies, charging orders on property, and investment deductions. Since July, $207 million has been recovered from student loan borrowers living overseas, a 43% year-on-year increase.

Calls for leniency rejected as pressure mounts

Among those watching the crackdown closely is Auckland tax expert Dave Ananth, who has become an unlikely ally to distressed OBBs. Profiled by Rob Stock in The Post last month (paywalled), Ananth has helped negotiate six-figure penalty waivers in exchange for full repayments, giving clients the chance to return home without fear. He argues the punitive structure of the system – where a $45,000 loan can balloon to over $100,000 – needs reform, including a full or partial amnesty. But revenue minister Simon Watts has ruled this out, noting a similar effort in the 2000s had limited uptake.

Instead, the pressure is rising. Since April 1, another 1% has been added to student loan interest rates, taking the base rate to 4.9%, the late payment rate to 8.9%, and the reduced late payment rate to 6.9%. CTU economist Craig Renney tells Edmunds it’s a backwards move that won’t raise meaningful revenue and risks discouraging skilled workers from returning home. “There will be some people making the horrible decision about not seeing their family again,” he says.

IR’s turbocharged enforcement drive

The crackdown on student debt is just one front in Inland Revenue’s wider compliance push, supercharged by a $165 million funding boost in last year’s budget. That investment is paying off: from July to December 2024, IR says it opened 3,600 audits – 50% more than the previous year – resulting in the discovery of $600 million in undeclared tax, with nearly half from just 10 large cases. Altogether, audits, data screening and voluntary disclosures added $859 million to tax revenue.

Recent IR figures show that the return on tax compliance investment is nearly ninefold – a fact that makes another funding boost likely in next week’s budget, says Chapman Tripp. With the government needing to make savings but eager to avoid spending cuts, it will be “looking to optimise its existing tax base”, the law firm warns, “meaning that taxpayers can expect increased information requests, audits, tax disputes and prosecutions”. Enforcement has already picked up, with court-ordered liquidations in the second half of last year increasing 84% over the same period in 2023.

Property speculators and pandemic borrowers under scrutiny

Two other groups firmly in IR’s sights are property investors and recipients of pandemic-era loans. In a review of 1,283 property-related tax cases, IR says it uncovered $153.5 million in undeclared income tax and GST – an average discrepancy of nearly $120,000 per case. Much of it stemmed from developers who claimed early GST refunds but failed to file or pay taxes after selling, 1News reports.

Meanwhile, businesses that borrowed under the small business cashflow (SBC) loan scheme are on notice: from June, default interest of 10.88% will apply to unpaid loans. The scheme, introduced in 2020 to support struggling businesses, issued $2.4 billion in loans, but $853 million remains outstanding, reports David Hargreaves at Interest. The loans were interest-free for the first year then subject to a 3% rate, for a maximum loan period of five years. Over 14,000 loans are already in default, prompting IR to take direct bank deductions and warn of legal action ahead.

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David Seymour has suggested the tribunal should be ‘wound up for its own good’. (Image: Getty Images/The Spinoff)
David Seymour has suggested the tribunal should be ‘wound up for its own good’. (Image: Getty Images/The Spinoff)

The BulletinMay 13, 2025

Act takes a victory lap as Waitangi Tribunal faces government review

Contributing writer
David Seymour has suggested the tribunal should be ‘wound up for its own good’. (Image: Getty Images/The Spinoff)
David Seymour has suggested the tribunal should be ‘wound up for its own good’. (Image: Getty Images/The Spinoff)
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The government says its review will help the tribunal navigate the coming decades. Critics say it’s an ideological attack in disguise, writes Catherine McGregor in today’s extract from The Bulletin.

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A half-century check-up…

The Waitangi Tribunal is undergoing its first-ever formal review, nearly 50 years after the body was established. Announced last week by Māori development minister Tama Potaka, the review aims to examine whether the tribunal’s scope, processes and legislative mandate remain fit for purpose. Potaka stressed the review would not predetermine the tribunal’s future but was necessary due to a ballooning workload and the near-completion of historical settlements. The four-person (two Māori, two Pākehā) Independent Technical Advisory Group, chaired by Bruce Gray KC, is due to provide recommendations by September, with legislative proposals expected before the end of the year.

… Or a political ambush?

Opposition parties have rushed to condemn the review. Labour’s Willie Jackson said it was outrageous that “the most anti-Māori government I’ve seen in my lifetime is now conducting a review of the watchdog that at least keeps a lot of Māori, a lot of New Zealanders safe”. The Greens’ Māori development spokeswoman Hūhana Lyndon called it a “disgrace” while Te Pāti Māori’s Tākuta Ferris said he was “absolutely disgusted” by news of the review.

Others offered more nuanced perspectives. Speaking to Te Rina Kowhai for Te Ao Māori News, former Treaty negotiations minister Chris Finlayson said a review was long overdue, but it should focus on the many bureaucratic hurdles to full implementation of the tribunal’s findings. Writing in the NZ Herald (paywalled), Audrey Young argued that accusations of a “hatchet job” were premature: “To suggest any organisation is above review is not remotely realistic in 2025.”

Also speaking to Te Ao Māori News, Treaty law scholar Carwyn Jones agreed the tribunal must evolve but warned the government’s framing of the review as a return to “original intent” – as promised in the NZ First-National coalition agreement – was misleading: “It seems … they think the original intent of the tribunal was to look at historical claims” when that was never the case, he said. At the time of the Waitangi Tribunal’s establishment in 1975, it only heard claims relating to current government actions. The historical claims process began in 1985, after the Lange Labour government expanded the tribunal’s mandate to investigate grievances dating back to 1840.

Act says the quiet part out loud

While Potaka has maintained a measured tone, coalition partner Act has not held back. In a media release welcoming the review, David Seymour described the Tribunal as “increasingly activist” and in need of being put “in its place”. The rhetorical chasm between the two coalition partners is the inspiration for Hayden Donnell’s piece in The Spinoff this morning, in which he quips that Seymour has shown remarkable dedication to combatting the government’s own PR. “Media organisations like to say they can cut through spin like Aragorn’s sword Andúril through orc flesh,” he writes, “but few of them demolish government messaging more brutally than the second-largest party in the government.”

A long history of hostility

Act’s antipathy toward the Waitangi Tribunal is nothing new. The party has long portrayed the tribunal as an unelected force undermining democracy, with Seymour last year floating the idea that it should be “wound up for its own good”. In March, former Act leader Richard Prebble resigned from his short-lived appointment to the tribunal, telling Stuff’s Joel Maxwell he didn’t initially know what he was getting into and “was not aware how extreme their reinterpretation of the Treaty is”. Treaty lawyer Annette Sykes was among those who suspected Prebble’s tribunal tenure was a publicity stunt: “Was this really only a media ploy on the part of the Act party? If it is then it really shows how desperate they are.”

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