The Government could soon step in to collect money from students who leave their student loan debts behind when they move across the ditch.
Prime Minister John Key and Australian prime minister Julia Gillard discussed the crackdown on student loans at their formal summit in Queenstown on the weekend.
Key told TV ONE's Breakfast programme this morning that New Zealand students who go to Australia owe approximately $600 million, while Australian students in New Zealand owe around $20 million.
If the move goes ahead, information could be shared between New Zealand and Australia's tax departments, meaning wherever students end up in the trans-Tasman economy, they will not be able to avoid mandatory loan payments.
"So what's going to happen effectively, this is an agreement if we can get it completely nutted out, will be the Australian tax office will essentially work with New Zealanders living in Australia who have student debt and get that money back for us in the same way that if you are a student at the moment and you start working in New Zealand the tax office starts essentially taking that 10% of your wages off you to pay back your student loan."
He said the Australian tax office does not get a cut for their work.
Key agreed it is only a drop in the ocean for recovering more than $10 billion which is owed in student debt.
"Under the previous government they didn't even chase that debt in Australia and other countries at all. When we came in we said this is crazy we should be starting to do that so we started putting pressure on and quite a lot money came in, but this would be a much more sophisticated way of doing that," Key said.
The student loan deductions will be triggered once a person starts paying tax.
The process would also work in reverse so Australian loan defaulters living here could face the same action.