## Calculator FAQ

What is the interest rate?

How is the interest rate calculated?

How is the interest rate applied to the debt?

What is the base rate?

When does the Reserve Bank release the 6-month term deposit rate?

What is the initial amount?

What is judgment debt?

What is a money judgment?

What is the start date?

What is the end date?

Can I enter payments/instalments between the start date and the end date of the debt?

What if the overpayment shown by the calculator has already been made?

What if I am making a calculation with a future end date?

What if I think the calculation is wrong?

What do I have to do to be awarded interest by the court?

I started my case in the court prior to 1 January 2018, can I get interest awarded under the Act?

Where can I read the Act?

#### What is the interest rate?

The interest rate for any specific day is a combination of two things: the base rate and the premium. For any specific day, these two things are combined and expressed as a daily effective rate.

#### How is the interest rate calculated?

The interest rate is calculated for a specific day by:

1. Taking the six most recent observations for the retail 6-month term deposit rate that have been published by the Reserve Bank of New Zealand (RBNZ), and taking an average of these six rates. The average is the base rate.
2. Adding the premium of 0.15% to the base rate. The result becomes the per annum simple interest rate.
3. Converting the per annum simple interest rate into a daily effective rate. The formula for this conversion is as follows:

Daily effective rate = ((1+"per annum simple interest rate as %"/100)^(1/”Days in the year”)-1) x 100

The result is the interest rate expressed as a daily effective rate for the specific day.

#### How is the interest rate applied to the debt?

The daily rate is applied to all days within a specific period. Prior to 1 January 2018 it is applicable from the second day of the month to the first day of the following month.

From 1 January 2018 onwards, the rate applies from the day after the Reserve Bank of New Zealand (RBNZ) publishes its new 6-monthly rate until the date the next rate is published (see When does the Reserve Bank release the 6-month term deposit rate?).

#### What is the base rate?

The base rate, which forms part of the interest rate, is the average of six observations (months) of the retail 6-month term deposit rate most recently published by the Reserve Bank of New Zealand on a specific day.

The 6-month term deposit rate is published every month by the Reserve Bank of New Zealand.

The 6-month term deposit rate is described on the RBNZ website(external link) as the advertised interest rate payable for a new 6-month term deposit of \$10,000.

#### When does the Reserve Bank release the 6-month term deposit rate?

The 6-month term deposit rate is published monthly, usually 4-11 days following the end of the month.

The premium is a set percentage rate of 0.15% per annum, which is added to the annual base rate to form per annum simple interest rate, which is then converted into the daily effective rate.

#### What is the initial amount?

This is the amount specified by the court in a money judgment, on which interest is to be awarded for a defined period.

When the court specifies the initial amount, it must include any amount paid by a liable party after commencement of a money claim, but before a judgment is given IF the judgment date is earlier than the date of that payment.

#### What is judgment debt?

Judgment debt comprises two things:

1. The total of the amounts, if any, that are required to satisfy the liability of a party under a money judgment; and
2. Any interest awarded under this Act or any other Act, rule of law or rule of equity in respect of any period or periods specified in the judgment.

#### What is a money judgment?

A money judgment is a judgment or order made by a court in a civil proceeding that requires financial payment.

It also includes a judgment obtained by default or in accordance with a summary judgment procedure.

#### What is the start date?

When a court is defining a period to award interest on, the start date is the date the period begins, which is either:

• The day on which the cause for action arose; or
• A later date the court will specify in the judgment.

#### What is the end date?

The end date or last day (as defined in the legislation) is defined as either:

• The day on which the judgment debt (including all interest payable under this Act) is paid in full; or
• If the court has specified in the judgment one or more shorter periods for which interest is to be awarded under this Act, the end day of each of those periods.

#### Can I enter payments/instalments between the start date and the end date of the debt?

Yes.  The calculator allows you to add single payments or blocks of multiple payments during the debt period, to reduce the final amount owing at the end of the period and the amount of interest paid.  The calculator will alert you if any such payments would result in overpayment.

#### What if the overpayment shown by the calculator has already been made?

You should talk to the judgment creditor about a refund and you may wish to seek legal advice about your options.  Note that where an overpayment is shown by the calculator, the amount shown does not include interest on the overpayment (i.e. the calculator stops adding interest when the debt is repaid).

#### What if I am making a calculation with a future end date?

To enable calculations to be made in respect of debt periods with future end dates, the calculator applies the current daily effective rate to all future days for the next ten years.This rate can be considered accurate for future days until the date the next 6-month term deposit rate is published by RBNZ.

For days after this date, the current rate should be treated as indicative only and subject to change each month: see How is the interest rate applied to the debt?

#### What if I think the calculation is wrong?

Under current legislation, the Ministry is responsible for ensuring a calculator allows interest to be calculated:

• At the relevant interest rate or interest rates expressed as a daily effective rate; and
• At daily intervals.

The calculator must also comply with any prescribed rules or requirements governing the establishment or operation of the Internet site calculator.

An application can be made to the court either before the judgment is sealed, or later if permitted by the rules of the court, if the calculator has made an error when calculating interest. The court may make such orders as it considers fair, if the court is satisfied that:

• The calculator has not allowed interest to be calculated as required; and
• A resulting error has occurred in awarding interest.

#### What do I have to do to be awarded interest by the court?

When you are filing your application to the court (either a statement of claim or a counterclaim), you will need to provide the following information:

1. Specify the relevant section of the Act under which interest is claimed; and
2. As accurately as possible, state the period for which interest is claimed.

If you are claiming interest under special circumstances, for example in respect of a judgment expressed in foreign currency or under a contract, you must specify the amount or rate of interest claimed. In this type of case, the court may not award interest at a rate exceeding the amount or rate claimed.

#### I started my case in the court prior to 1 January 2018, can I get interest awarded under the Act?

No, you can’t be awarded interest under the new Act. You could be awarded interest, but it will be under the old legislation.

If you started your case in the High Court, the old section of the Judicature Act 1908, section 87 will still apply. If you started your case in the District Court, sections 62B and 65A of the District Courts Act 1947 will still apply.

Only cases commenced from 1 January 2018 can be awarded interest under the new Act. See question What do I have to do to be awarded interest by the court? for more information.

#### Where can I read the Act?

The Act can be viewed on Interest on Money Claims Act 2016(external link)