Government pushes ahead on student loans and family tax relief

The Government will fast track through Parliament its election pledges on interest-free student loans and expanding the Working for Families package.

Loans legislation would be passed before the House rose in mid-December, Finance Minister Dr Cullen said today. This would allow it to take effect when the tax year begins next April.

Interest-free student loans would apply to existing and new loans, but students would have to be in New Zealand to qualify.

Dr Cullen said: "Borrowers will be deemed to be non-resident when they have been out of the country for more than 183 consecutive days. Short visits (31 days or less) back to New Zealand will be counted as if the person had remained overseas."

Borrowers returning to New Zealand would after 183 days back in the country get any interest charged on their loan from the first day of their loan reversed.

"As a further inducement to encourage people back, non-resident borrowers who are in default for non-repayment of their loans will have their penalties cancelled under a special amnesty."

It was estimated that the interest-free regime would reduce the value of the student loans portfolio held by the Crown by around $1.5 billion as well as a further $500 million reduction due to changes in accounting treatment.

Inland Revenue would also need more money to ease "capacity pressures" caused by the loans policy and the extension of the Working for Families package.

Financial provision for the families package changes would be dealt with in another bill to be introduced later this month, Dr Cullen said.

The changes to the financial assistance programme would see the income qualification threshold raised and made more generous.

The size of the assistance would depend on income, costs and the number of children in the family.

Dr Cullen estimated it would average $50 a week more to 160,000 working families.

- NZPA