Overview

This report outlines the changes to the bill that have resulted from Inland Revenue changing its approach to implementing the student loan reforms and supplements information provided in the officials’ report of 29 April 2011.

Implementation of the policy and administrative reform package for student loans through a new loan management system has proved more complicated than expected. The complexity is due to extracting and transferring historical student loan data from Inland Revenue’s FIRST computer system to the new loan management system, and the integration of the new loan management system with the FIRST system. A high-level review of the project has indicated that attempting to complete the full project by April 2012 in the new system is unachievable. As a result, the legislative changes will now be implemented within the existing FIRST system. Some parts of the bill will need to be deferred until 1 April 2013 to enable the main policy components of the reforms to take effect from 1 April 2012.

The main system changes that need to be deferred until 1 April 2013 are:

• the new interest and penalty rules. However, a reduced late payment penalty rate will continue to apply from 1 April 2012;
• payment priority changes; and
• changes from a period-based debt approach (such as that used for tax with a tax year and taxable periods) to a whole-of-debt approach (similar to a mortgage).

These changes require the bill to be amended to continue the current mechanisms for the imposition of interest and late payment penalties, the priority of how payments are allocated to meet borrower repayment obligations, and retaining a period-based accounting for debt for the 2012–13 tax year. The changes are outlined further in this supplementary report.