Penalty provisions

The penalty provisions have been changed. Penalties play an important role in encouraging parents to meet their child support obligations. However, excessive penalties can discourage the payment of child support to the detriment of the children concerned.

Initial late payment penalty

Currently, the initial late penalty payment applies as the greater of $5 or a 10% charge applying the day after the due date. This appears excessive if the lateness resulted from an oversight. The new provision is to apply the initial late penalty payment as the greater of $5 or a 2% charge on the overdue amount of financial support on the day after the due date. There would be a further 8% charge on the overdue amount (excluding the $5 or 2% penalty) seven days after the due date. This will provide liable parents a little bit more time to ensure their child support is paid before the full 10% penalty is applied.

Incremental late payment penalty

Currently, the incremental late payment penalty applies a 2% charge every month until the debt (including penalties) is cleared. The new provision will charge the incremental late payment penalty in two steps:

• 2% of the overdue amount each month for up to 12 months after the due date, and
• 1% of the overdue amount each month from 12 months after the due date until the debt is cleared.

The provisions relating to a liable person's financial support debt can also apply to a payee's debts arising from overpayments.