Inland Revenue is threatening to bankrupt former students living in Australia who are refusing to repay loans.
Tax staff have cracked down on hundreds of student-loan borrowers in New Zealand and are moving their enforcement across the Tasman.
The plan is revealed in IRD documents released to the Herald under the Official Information Act.
Katrina Williams, an IRD section director, said in the documents: "In Australia, we are taking legal action and when this fails, issue bankruptcy proceedings when overseas-based borrowers have not paid."
That would mean that the IRD could get a New Zealand court judgment transferred to Australia, where it would then be enforced.
Measures could involve charging orders on a property, deducting money from a person's salary, seizing assets such as vehicles and even bankruptcy.
The same system is being planned for borrowers living in Britain. The documents show IRD has taken legal action against 360 people in New Zealand and 38 borrowers who live overseas, most of them in Australia.
IRD collections manager Richard Owen said yesterday that no one had yet had bankruptcy proceedings issued against them.
However, IRD was looking at doing so, as a small group of borrowers - particularly in Australia - were knowingly avoiding making payments.
"This is for borrowers who we've had regular contact with. They know they've got a loan, they know they are in default and we know that they are in a position to pay but simply not wanting to do anything about it."
Mr Owen acknowledged that taking legal action, let alone issuing bankruptcy proceedings, was rare. But it had reached the point that it was necessary to try to recover debts.
"We're in the final stages of getting the judgments now put across to Australia. We're just going through that process. From there, that means we can start taking one of the range of legal activities.
"Bankruptcy generally wouldn't be the first choice. We'd want to give people the opportunity, with legal action, still to do the right thing.
"It's quite severe and major and it affects people's lifestyles, so we would take that only as a last resort."
The president of the New Zealand Union of Students Associations, Pete Hodkinson, said the "extreme measures about to be taken to chase down New Zealand graduates who are gaining overseas experience are symptomatic of a Government that is prepared to treat graduates as if they were in the same category as tax-evading criminals or worse".
Inland Revenue started campaigns in 2010 to get overseas-based Kiwis to pay off loans.
By the end of June this year, just over 5000 borrowers had repaid nearly $27.5 million.By Vaimoana Tapaleao Email Vaimoana