Annual Report 2008: Part two - Key business results
Social policy programmes
Student loans
Inland Revenue collects student loan repayments. Most repayments are made through the PAYE system, the remainder coming directly from self-employed and overseas borrowers.
The loan portfolio
During 2007/08 the total loan borrowings under the scheme increased from $7.9 billion to $8.6 billion[10]. There were 15,141 borrowers who repaid their loan this year, compared to 19,779 last year[11].
As at 30 June 2008:
- there were 530,289 student loan borrowers, compared to 499,259 last year
- the median value of a student loan was $10,883
- overseas-based borrowers were about 14.5% of all borrowers.
Repayments
This year we received $550 million in loan repayments, $63.5 million more than last year. Most of the increase in loan repayments is from repayments through the PAYE system. This increase is consistent with the high level of employment in 2007-08 and the continuation of the trend from previous years, as progressively more borrowers complete their studies and enter the workforce.
| 2003-04 $ million |
2004-05 $ million |
2005-06 $ million |
2006-07 $ million |
2007-08 $ million |
|
|---|---|---|---|---|---|
| PAYE system | 210.1 | 239.3 | 313.9 | 344.2 | 394.4 |
| From borrower | 237.1 | 271.0 | 172.5 | 142.3 | 155.6 |
| Total | 447.2 | 510.3 | 486.4 | 486.5 | 550.0 |
Amnesty
The amnesty on late payment penalties for non-resident borrowers, which ran from 1 April 2006 to 31 March 2008, was available to student loan borrowers who had been living overseas and had fallen behind in their repayments. All eligible borrowers either had their late payment penalties reversed or not applied to their account. They then had to apply for the amnesty by 31 March 2008 to avoid having the penalties reapplied to their loan account.
More than 13,000 (30%) of eligible borrowers, applied for the amnesty and agreed to begin making repayments on their student loans. Borrowers whose amnesty applications were accepted are required to make four equal repayments over two years towards their student loan. For the majority of borrowers the two-year term will end in the 2010 tax year. If a borrower does not meet their amnesty repayment obligations, a penalty is added to their loan balance based on the number of payments they have made.
There were about 31,000 borrowers who did not apply for the amnesty and received a one-off amnesty penalty. The penalty is the lesser of 5% of the total loan balance as at 31 March 2008, or the sum of the late payment penalties which were reversed or not established.
More information
For more detailed information see the Student Loan Scheme Annual Report published by the Ministry of Education. The report will be available at educationcounts.govt.nz/publications.
Working for Families Tax Credits
This year, the total amount of Working for Families Tax Credits (WFFTC) distributed by Inland Revenue and the Ministry of Social Development (MSD) was $2,644 million. Inland Revenue distributed $1,984 million (75%) of the Working for Families Tax Credits paid.
Customers can choose to receive their entitlements weekly, fortnightly or as a lump sum at year-end. Details of customers receiving regular WFFTC payments is included in figure 14.
Under and overpayment of WFFTC are an inevitable consequence of delivering weekly and fortnightly instalments through an annually based tax system. In tax credit systems like this, if a family's actual end-of-year income is not equal to the estimated income used to establish payment levels, they will receive an under or overpayment. Similar systems in the United Kingdom and Australia also experience this issue. Key initiatives have significantly reduced the number of families receiving overpayments and possibly falling into debt. These include:
- the introduction of "My family details and income", an online service which lets customers view and update their personal details
- the proactive contacts service, where we undertake outbound calling for both new customers and those who are potentially at risk of overpayment
- information exchange with MSD, which ensures the information we hold for our WFFTC customers, is as accurate as possible. We are working with MSD to improve this exchange, including the move to a business-to-business platform.
| June 2004 | June 2005 | June 2006 | June 2007 | June 2008 | |
|---|---|---|---|---|---|
| Customers receiving regular payments from Inland Revenue | 69,400 | 88,000 | 159,000 | 190,000 | 197,800 |
| Average payment per week | $86 | $116 | $138 | $153 | $150[12] |
Child support
Child Support serves as an intermediary for approximately 173,000 liable parents and 175,000 custodial parents, who support an estimated 265,000 children.
Since the scheme began in 1992, we have collected 88.4% of the $4.0 billion child support assessed. Historically, our collection rates compare favourably with those of other countries.
This year we collected $367 million[13] in child support payments, compared to $347 million for 2006-07. 21% of the amount collected was for previous year assessment arrears and penalties.
This year we distributed $192.9 million of child support and domestic maintenance to payees and $164.3 million to the Crown to offset benefits paid to custodians (through MSD). Payments to the Crown include penalties as well as assessments paid.
Paid parental leave
Paid parental leave is a payment for parents who take leave from their jobs or business to care for a new baby or adopted child. Inland Revenue distributes paid parental leave on behalf of the Department of Labour. The maximum amount of paid parental leave is inflation-indexed each year. The maximum weekly rate increased from $371.42 to $391.28 from July 2007.
This year we:
- distributed $134 million to eligible applicants
- processed 26,304 applications for paid parental leave compared to 25,373 last year.
Date published: 15 May 2009
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