Background

The Child Support Act 1991 is over two decades old. The child support scheme is primarily a back-up arrangement that operates when parents do not live together and cannot reach agreement over the financial support of their children. In some cases where voluntary agreements are reached, the collection and distribution of child support can be administered by Inland Revenue. It also applies when the receiving carer is receiving a social security benefit.

In September 2010, the Minister of Revenue released a government discussion document entitled Supporting children - A Government discussion document on updating the child support scheme. The discussion document consulted on ways to update the child support scheme and make the scheme fairer to the parents involved. Over 2,000 people participated in the consultation.

In August 2011, Cabinet agreed to a number of changes and introduced the Child Support Amendment Bill 2011. Fifty-nine submissions were received by the Social Services Select Committee, which made a number of changes. Further minor changes were made at the Committee of the Whole House by Supplementary Order paper. The bill received its third reading on 9 April 2013 and received Royal assent on 16 April 2013.

Key features

The reforms have three key features:

• a comprehensive new formula for child support assessments
• improving the way the child support regime operates, and
• improving the way penalties and debt are managed.

Changes regarding the operation of the formula include:

• recognising the income of the receiving parent as well as the liable parent
• a new definition of income that includes most of the family scheme income adjustments in the Income Tax Act 2007 such as income in family trusts and some fringe benefits
• changing how allowances relating to the living costs of the parent and their children are determined, including a multi-group allowance, and no longer including an allowance for a new partner or children who are not legally dependent children of the parent, and
• recognising minimum care levels from 28% of nights (previously 40% was required) and allowing for daily care to be considered in some cases.

Other changes to the operation of the child support scheme have also been made. These include:

• recognising re-establishment costs as an administrative review ground in some circumstances
• allowing the Commissioner to rely on parenting orders and agreements when establishing care levels
• reducing the qualifying age of children subject to child support from under 19 to under 18, unless they are aged 18 and still in secondary education, and
• changes to the way estimations of income are calculated.

Changes to the rules relating to the payment of child support, the imposition of penalties and the writing-off of penalties and debt include:

• extending automatic deduction of child support from employment income of liable parents, except where automatic deduction is considered inappropriate by the Commissioner
• introducing a Commissioner discretion to allow various prescribed payments to be recognised for child support purposes, such as payment of the child's school fees
• a two-stage initial penalty, with the current full 10% penalty only applying if the debt remains unpaid after 7 days
• reducing the incremental monthly penalty from 2% to 1% after a year
• relaxing the circumstances in which penalties can be written-off, including when a liable parent enters into an instalment arrangement or is in financial hardship, or where debt recovery is an inefficient use of the Commissioner's resources
• allowing the Commissioner to write off assessed debt on serious hardship grounds where it is owed to the Crown, and
• allowing the Commissioner discretion for further offsetting of ongoing child support payments against child support arrears.