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Interest-free loans for residents of realm countries

(Clauses 10(2) to (5), 13 and 25(2))

Summary of proposed amendment

The bill introduces an exemption for borrowers in Realm countries from the requirement that they be present in New Zealand to qualify for an interest-free loan. The change reflects the special relationship that Realm countries have with New Zealand and aims to encourage borrowers who want to remain in and make a contribution to these countries to do so.

Application date

The change will apply from 1 April 2009.

Key features

Section 38AE of the Student Loan Scheme Act 1992 is being amended to allow a further exemption to the requirement that borrowers reside in New Zealand to qualify for an interest-free loan. New section 38AIA sets out the conditions of the exemption. Borrowers will qualify for an interest-free loan if they are present in a Realm country – Niue, the Cook Islands, Tokelau or the Ross Dependency – for 183 or more days. The purpose of the amendment is to encourage those who want to live in and make a contribution to these countries to do so. Their student loans will be interest-free, as if they were still living and working in New Zealand.

Borrowers will need to provide Inland Revenue with whatever information is needed to establish their annual income and presence in one or more of these countries, and to pay their annual liability as it falls due. Consequential change is being made to section 65A of the Student Loan Scheme Act 1992.

Background

Interest-free loans were introduced from 1 April 2006 to encourage borrowers to remain in, or return to, New Zealand. Niue, the Cook Islands and Tokelau have a special relationship with New Zealand, which gives their residents an automatic right to reside and work here. Extending interest-free loans to borrowers residing in these countries recognises that special relationship.