Child Support Changes Introduced Into Parliament

  • Max Bradford
Revenue

Parents liable for paying child support won't in future be able to escape their obligations by moving to Australia, Revenue Minister Max Bradford said today.

Mr Bradford was commenting on the Child Support Amendment Bill (No. 5), which was introduced into the House today.

"The Bill means that once the reciprocal agreement with Australia is finalised, New Zealand will be able to assess a liable parent on the basis of their Australian income, and the Australian authorities will be able to collect the payment," Mr Bradford said.

He said the Bill also included a number of administrative changes to improve the operation of the child support scheme and make the scheme work better for all concerned.

"About 600,000 people - including children and parents - are directly affected by the workings of the child support scheme, so it is particularly important that it operates effectively and fairly," Mr Bradford said.

These changes include:

Greater flexibility to write off penalties for late payment, a measure designed to encourage liable - or paying - parents to comply with the law;

Assessing liable parents payments on their previous year's income, rather than income of two years previously.

Fairer and easier rules relating to liable parents who choose to estimate their income for the current year.

Fairer and more consistent rules on exemptions from paying child
support for liable parents who spend time in hospital or prison.

A commentary on the bill gives more detail of the changes. It is available on the Inland Revenue Website (at http://www.ird.govt.nz) and from Bennetts Bookshops.

Media Enquiries: Ann Howarth (04) 4719-836 025-424-565

EXAMPLES OF WHAT THE CHANGES WILL MEAN TO LIABLE PARENTS AND CUSTODIANS

Liable parents who move to Australia

Liable parent Mike moves to Australia. At present the child support liability is $520 a year, even if Mike is on a high salary. The Bill provides for the expected finalisation of a reciprocal agreement with Australia which will mean that in future Mike will have to pay his New Zealand child support liability based on his income in Australia.

More flexibility for penalties for late payment

Steve, a liable parent with an assessment of $150 per month who has always complied with child support obligations, is in hospital following an accident and misses one payment. Under the current requirements, a penalty of $15 is imposed.

Under the proposed change, if Steve contacts Inland Revenue and pays the $150 as soon as it is practicable to do so, the penalty can be written off.

Reconciling estimated and actual income Andy, a liable parent with taxable income of $45,000 in the income year ended 31 March 1997 who is required to support one child is assessed to pay

$6,053 for the child support year ended March 1999. Andy changes his employment and estimates that his taxable income in the year ended March 1999 will be $36,000. His assessment based on the estimate is $4,433, which he pays. However, he does not file a tax return at the end of the year so Inland Revenue is unable to reconcile his assessment to check that he paid the correct amount. If he actually earned more than $36,000 Julie, the custodian will have received less child support than she was entitled to.

Under the proposed changes, Andy, as he has not filed his income tax return, will have a reconciliation assessment issued based on the original taxable income of $45,000. He will be given the usual objection rights. If he still fails to provide his actual 1999 income information he will not be allowed to estimate his income again.

To ensure that liable parents who do file end of year income tax returns after an estimation are not disadvantaged, all reconciliations will be limited to no more than the amount that would have been payable if there had been no estimation.

Exemptions

Kathy is in hospital for 11 months. After her discharge she gets a community wage but receives it for only two weeks in the child support year. Under the current provisions, Kathy would be required to pay a full year 's child support at the minimum amount of $520.

Under the proposed changes, Kathy would be exempt from paying child support for the full 11 months of her stay in hospital provided she meets the income criteria. She would be required to pay the minimum amount for one month only, approximately $43.