Exemption from liability

Sections 85K and 85L of the Tax Administration Act 1994

Two new exemptions from liability for child support - a permanent exemption for victims of sex offences, and a temporary exemption for liable parents under the age of 16 years - have been incorporated into a new Part 5A. The new Part also restructures the previous provisions relating to exemptions, makes some remedial changes to them and includes new provisions for determinations that exemptions be set aside on application from the payee.

Background

Recent changes to provisions relating to sexual crimes in the Crimes Act 1961 highlighted the potential for victims of sexual crimes to become liable for child support when a child is born as a result.

The two most likely scenarios are:

• A male, who is the victim of abuse by an older female, fathers a child as a result of the sexual act.
• A female victim of abuse gives birth to a child as a result of the sexual act. She later has the child placed in foster care and becomes a liable parent in relation to the child.

In both cases an obligation to pay child support would be likely to add to the trauma already experienced by the victim.

Consideration of that specific issue was a catalyst for reconsidering the consequences for young people in general who become liable for child support at a time when their earning ability is limited through compulsory requirements for attendance at school. The reality is that if their parents do not help them to meet their obligations, they are likely to accumulate a debt that could ultimately act as a barrier to their successful transition into the workforce.

Allowing an exemption for young people does create some conflict with the rights of their children to receive financial support, particularly if the custodian is also under the age of 16 and consequently not eligible for income assistance. However, the exemption is only for a limited period and is considered to be in the long-term interests of both young parents and their children.

Key features

Victims of sex offences
Subpart 4 of new Part 5A provides for exemption of the victim from liability for child support for a child born as a result of an offence under the relevant sections of the Crimes Act 1961. New section 89Z requires Inland Revenue to grant a permanent exemption when satisfied that the requirements for the exemption have been met.

Section 89ZA provides for the exemption to be withdrawn if a conviction is overturned on appeal, but allows a new application for exemption in the event of a new conviction at re-trial.

New sections 85K and 85L have been inserted into the Tax Administration Act 1994 relating to information to be provided by the New Zealand Police and the Ministry of Justice for the purposes of this new exemption.

Liable parents under age 16
Young people are exempt from child support liability until they reach the age 16 years, in accordance with new section 89E, subject to the same income criteria that apply to hospital patients and prisoners. That means they cannot have earned income, although they can receive investment income, such as interest on a bank account, up to the level of the current minimum amount of child support. They can apply for an exemption up until three months after they reach age 16 years.

The new exemptions will not preclude voluntary payments, nor will it be compulsory to apply for them.

Remedial changes
Hospital patients can now apply for an exemption at any time up until three months after discharge.

When an exemption has retrospective effect Inland Revenue will not refund any payments made by the liable person. Such payments will be applied to past or future liability.

Because there are differences in the qualifying criteria, the new Part 5A provides separately for each category of exemption.

There are also a number of amendments to include new references as a consequence of the new Part 5A and related provisions.

Transitional provisions
Sections 46 and 47 of the Amendment Act are transitional provisions relating to exemptions that had been applied for or were in place before its enactment.

Application date

The amendments apply from 26 September 2006.