MPs call for student allowance tax loopholes to be closed

  • 25/11/2016
Revenue Minister Michael Woodhouse last week proposed a crackdown on abuse of the student allowance system (Reuters)
Revenue Minister Michael Woodhouse last week proposed a crackdown on abuse of the student allowance system (Reuters)

By Chris Holden

MPs are calling on the Government to close tax loopholes which allow the kids of some of New Zealand's wealthiest families to receive a student allowance.

The non-repayable allowance is designed to provide the kids of low- and middle-income families up to $175 per week while they study.

But a 20-year-old Victoria University student whose parents own a multi-million-dollar business told Newshub she gets the allowance because her parents "technically don't receive an income".

"Everything goes into the trust, so on paper we look like just your average struggling family."

A 21-year-old Waikato University student whose parents own a multi-million-dollar farm in the Waikato also told Newshub they get the allowance.

Last week, Revenue Minister Michael Woodhouse proposed a crackdown on abuse of the student allowance system. His proposed changes will see the Ministry of Social Development receive parents' income statements directly from IRD. Presently, parents submit payslips or a declaration of estimated earnings.

But some MPs say the proposed changes don't go far enough.

"The proposed changes are simply cosmetic, and will not pick up on wealthy parents who hide money in trust funds," Labour education spokesperson Chris Hipkins told Newshub.

"Labour is committed to a full review of the student loan and allowance scheme."

ACT leader David Seymour agrees the loophole has to be closed.

"Why is it that someone whose parents earn slightly out of the income threshold are denied the allowance, but the kids of billionaires who can afford intelligent tax lawyers remain eligible?"

Other students have told Newshub they "easily" obtain the allowance by lying about having separated parents, having no relationship to a parent, or their personal relationship status.

In the 2014 financial year, 15 people were successfully prosecuted for student allowance fraud, up nine on the previous year.

Between 2012 and 2014 the most common fraud was a failure to declare a relationship, which can affect the amount paid out.

Submissions on the proposed changes close on December 16.

Newshub.

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