Round Two of Changes to the Child Support Act come in on 1 April 2016 – What You Need to Know

The Child Support Amendment Act 2013 brought in two waves of changes – on 1 April 2015 and 1 April 2016. With the second wave fast approaching, here is an overview of the changes you need to be aware of:   

1.    Qualifying Age

The qualifying age for children to be included in a child support assessment will be reduced to under 18 years (it is currently under 19 years), unless the child is aged 18 and attending school. This applies both to children you pay or receive child support for, as well as children you have named as dependents. The IRD will write to or email you before the child’s 18^th birthday to ask about their plans, and you only need to contact them if the child is going to stay at school - otherwise the child support will stop the day before their 18^th birthday. However a child will stop qualifying for child support before their 18^th birthday if they:

•          Start living with another person in a marriage, civil union or de facto relationship;
•          Become financially independent; or
•          Are not a New Zealand citizen or no longer ordinarily reside in New Zealand.

2.     Penalty Rates and Debt Write-Offs

There is currently a 10% initial late payment penalty applied to any overdue child support. This is being replaced by a two-stage late payment penalty, which is charged as follows:

•          2% on the day after the due date; and
•          Another 8% eight days after the due date.

A 2% incremental penalty will be charged for each month after that for up to one year. After one year, the monthly incremental late payment penalties will reduce to 1%. Penalties are charged on the total unpaid amount, but these incremental penalty charges will not be applied if you begin repaying the debt under a payment arrangement.  

The IRD will also be able to consider writing off child support penalties in certain circumstances, including when:

•          You enter into a payment arrangement;
•          You are in ‘serious hardship’; or
•          The debt owing is penalties only.

You may be in ‘serious hardship’ if you have significant financial difficulties, but it is important to know that this does not include certain things like bankruptcy.

3.    Administrative Review Grounds

Two new administrative review grounds are being introduced, which relate to re-establishment costs and debt offsetting. This is in addition to the current ten grounds of review, and means that you will be able to apply for a child support review if extra income is earned within the first three years of separating from a child’s other parent, for the purpose of covering your re-establishment costs; or if you want your liability to a person offset against your entitlement to child support from that person (where this has not automatically occurred).

4.    Deductions from Employment Income

You will now be able to voluntarily have your child support payments deducted from your employment income, which could be helpful in ensuring that you do not fall behind. You can elect to do this if you are a liable parent who is not in debt, and you:

•          Earn PAYE income;
•          Receive ACC;
•          Earn withholding income; or
•          Receive a student allowance.

Note that the IRD will still be able to make compulsory deductions from any available income of a liable parent, if they do not pay their child support.

These changes are significant, and will hopefully assist people in managing their child support obligations. If you have any questions, please feel free to contact us or refer to the IRD website (www.ird.govt.nz) for further information.