Remedial matters raised by officials
Issue: Commissioner-initiated administrative review
Submission
Section 96Q of the Child Support Act should be amended, together with any other associated sections, to reflect the fact that a liable parent may want to elect to become a party to a Commissioner-initiated administrative review (CIAR), where appropriate.
Comment
During a Commissioner-initiated administrative review, the Commissioner of Inland Revenue may wish to review the financial resources of any parent involved in a formula assessment. Section 96Q of the bill states that the parties are to be:
- the parent who is the subject of the CIAR review; and
- any receiving carer, whether a parent or non-parent of the child, who elects to become a party.
Officials recommend that section 96Q should be amended, together with any other associated sections, to reflect the fact that a liable parent may also want to elect to become a party to a Commissioner-initiated administrative review, where appropriate.
Recommendation
That the submission be accepted.
Issue: Establishing proportions of care identified in an application
Submission
The words “identified on the application” should be removed from new section 14 of the Child Support Act in case not all carers, in fact, are identified on an application.
Comment
New Section 14 states that the Commissioner of Inland Revenue must establish the proportion of care that each parent and non-parent carer identified on the application provides.
To correctly establish the proportion of care that a person provides, consideration must also be had to anyone else who may also have care, whether or not they are identified on the application.
Recommendation
That the submission be accepted.
Issue: Notification by Commissioner of application
Submission
New section 13 should be amended to clarify that notification by the Commissioner of Inland Revenue of an application can occur if the relevant facts have already been ascertained.
Comment
New section 13 of the Child Support Act states that on receiving a properly completed application for a formula assessment in respect of one or more qualifying children, the Commissioner of Inland Revenue must notify the applicant, and every parent and carer identified in the application, that the Commissioner of Inland Revenue has received an application for a formula assessment and will therefore ascertain certain facts.
To allow the Commissioner of Inland Revenue flexibility on when parties are notified, given that the Commissioner of Inland Revenue may have already ascertained who the liable parents or receiving parents are, officials recommend that new section 13 be amended to clarify that notification can occur if the relevant facts have already been ascertained.
Recommendation
That the submission be accepted.
Issue: Suspension of other agreements
Submission
New section 19(2), which states that if a parent becomes liable under a formula assessment, existing liabilities under any other agreement in relation to that child are suspended, should be amended to clarify that the suspension only applies to a liability under a voluntary agreement.
Comment
New section 19(2) states that if a parent is liable under a formula assessment, existing liabilities under any other agreement in relation to that child are suspended.
However, in this context “any other agreement” is only intended to cover voluntary agreements, not court orders (consistent with section 20 of the current Child Support Act, which the new provision is designed to replicate).
Officials therefore recommend that new section 19(2) be amended to clarify that it only applies to the suspension of liabilities under voluntary agreements.
Recommendation
That the submission be accepted.
Issue: Form of application
Submission
The reference to an “application form” in new section 10(3) should be clarified so that it applies to different forms of application (such as online applications).
Comment
New section 10(3) states the application for formula assessment, and every document accompanying it, must be verified as specified in the application form.
Officials recommend that “as specified in the application form” be clarified so that it applies to different forms of application (such as online applications).
Recommendation
That the submission be accepted.
Issue: Details in notices of assessments
Submission
New section 88A(3)(f) should be amended so that “child expenditure notice” should instead read “child expenditure table”.
Comment
New section 88A(3) lists the things that need to be on the notice of entitlement for a non-parent carer. Subsection (f) states “the expenditure on each child from whom the carer provides care, as determined by the relevant child expenditure notice”.
Officials recommend that “child expenditure notice” in this regard should instead read “child expenditure table”.
Recommendation
That the submission be accepted.
Issue: Notification by Commissioner to other payers and payees
Submission
New section 89(2)(c) should be amended to reflect the fact that the requirement to supply the name of each child does not apply to domestic maintenance cases.
Comment
New section 89(2) states that the notice must set out a number of things, including the name of each child for whom payment is to be made.
Officials recommend that as the name of each child does not apply to domestic maintenance cases, subsection (c) should be amended to reflect this.
Recommendation
That the submission be accepted.
Issue: Notice of assessment of formula assessment of child support
Submission
New section 88(2) should be clarified to make it clear that notices of assessment can contain both details of the amount of child support a liable parent is liable to pay to each receiving carer and the amount of child support receiving carers will receive from each liable parent.
Comment
New section 88(2) states that the notice of assessment must set out, as a minimum, the relevant matters in section 88A, but in no case may a notice of assessment reveal any more detail about another person who is a parent or carer than:
- the person’s name (unless it is unsafe to do so);
- the person’s proportion of care; and
- the person’s cost care percentage.
Officials recommend that new section 88(2) be clarified to make it clear that notices of assessment are able to contain the following information:
- details of the amount of child support a liable parent is liable to pay to each receiving carer; and
- details of the amount of child support that child support receiving carers will receive from each liable parent.
Recommendation
That the submission be accepted.
Issue: Dependent child allowance
Submissions
Parents claiming the dependent child allowance should be required to provide an IRD number for a child, or alternatively the information to enable an IRD number to be allocated, when claiming a dependent child allowance for that child for the first time.
The definition of “dependent children” in new section 35(3)(c) should be amended to exclude children that a person is liable to pay child support for under an Act equivalent to the Child Support Act in an overseas jurisdiction.
Comment
The bill does not currently specify any information requirements that must be provided to Inland Revenue for a parent to be eligible for the dependent child allowance. To ensure that dependent child allowances are only granted where appropriate, parents should be required to provide an IRD number for a child, or alternatively the information to enable an IRD number to be allocated, when claiming a dependent child allowance for that child for the first time. This is similar to the requirement for “qualifying children” under proposed new section 10(2)(d)).
Officials also recommend that the definition of “dependent children” in new section 35(3)(c) should also be amended to exclude children that a person is liable to pay child support for under an Act equivalent to the Child Support Act in an overseas jurisdiction.
Recommendation
That the submissions be accepted.
Issue: Overseas children
Submission
New sections 5(a)(ii) and 35 (3)(b)(ii), that define “qualifying children” and “dependent children”, should be amended to cover 18 year old children still enrolled in overseas secondary schools.
Comment
New sections 5(a)(ii) and 35 (3)(b)(ii) state that both a “qualifying child” and a “dependent child” need to be under 18, or aged 18 but still enrolled at a registered school (as defined in section 2(1) of the Education Act 1989).
The reference solely to the Education Act 1989 prevents children who are aged 18 and enrolled in a secondary school overseas from meeting the criteria. To ensure that children overseas are not excluded, officials recommend that the definition of “qualifying children” and “dependent children” be amended to include equivalent Acts in overseas jurisdictions.
Recommendation
That the submission be accepted.
Issue: Children aged 18 who are still enrolled at secondary school
Submission
When children aged 18 stay at secondary school for all of the academic year, then the child should be treated as having stayed at school until the 31 December of the year they left school.
Comment
New section 5(a)(ii) states that a “qualifying child” needs to be under 18, or aged 18 but still enrolled at a registered school (as defined in s 2(1) of the Education Act 1989).
Officials recommend that when children aged 18 stay at secondary school for all of the academic year, then the child should be treated as having stayed on at school until the 31 December of the year they left school.
This would be more efficient from an administrative standpoint, as the end of the academic year varies slightly between schools. In the absence of such a provision, Inland Revenue would have to establish what school each child was at and contact that school to find out when the academic year finishes. A similar provision already operates for Working for Families tax credit purposes, and also for certain benefits.
Recommendation
That the submission be accepted.
Issue: Identification of liable parents and receiving carers
Submission
Proposed new section 17 should be amended to reflect the policy intent that a parent whose income percentage is greater than or equal to their care cost percentage should be a liable parent.
Comment
Proposed new section 17 currently identifies liable parents and receiving carers as follows:
- a parent whose income percentage exceeds their care cost percentage is a liable parent of the child;
- a parent carer whose income percentage is less than their care cost percentage is a receiving carer of the child, and
- a non-parent carer who provides at least 28% of ongoing care is a receiving carer.
Following this definition, if a person’s combined living allowance, dependent child allowance and multi-group allowance exceeded their adjusted taxable income, they would not be a liable parent (as their income would be nil, and therefore does not exceed their care cost percentage, even when this is also nil).
It was not the policy intention that parents should not be a liable parent merely on the basis that they have a low income. The policy intent was that if a parent’s income percentage less care cost percentage was nil, and the proportion of ongoing daily care was less than 28 percent, they should be a liable parent and therefore be subject to the minimum payment. Parents whose care is 28 percent or more are considered to be incurring sufficient costs to warrant the waiving of the minimum payment.
Officials therefore recommend that proposed section 17 of the Child Support Act be amended to reflect this.
Recommendation
That the submission be accepted.
Issue: Formula for assessing annual amount of child support
Submission
New section 29 should be clarified to make it clear that if section 36A applies, then the liable parent’s liability is the amount calculated as per section 36A.
Comment
Proposed new section 29 sets out the formula for assessing a liable parent’s child support liability. New section 29(2) states that if a liable parent is entitled to a multi-group allowance, the annual amount of child support for a child is the lesser of:
- the amount determined by the formula in section 29(1); or
- the amount determined under the multi-group cap in section 29(3).
New section 29 does not, however, state that if new section 36A applies, and the amount determined in section 29(1) or (3) is higher than section 36A, then the liability is the amount calculated under section 36A.
New section 29 should therefore be clarified to make it clear that if section 36A applies, the liable parent’s liability is the amount calculated according to section 36A. If section 36A applies, but the liable parent is liable for the minimum amount for this case, then the minimum amount applies.
Recommendation
That the submission be accepted.
Issue: Rounding
Submission
All rounding relating to daily, monthly and annual liabilities should be done to the nearest 10 cents, with rounding to a whole dollar only applying in relation to values applied to and included in the child expenditure table and in the charging of late payment penalties.
Comment
Sections 136 and 237 of the Child Support Act currently provide for daily and monthly amounts to be rounded to the nearest 5 cents and annual liabilities to the nearest dollar. As New Zealand’s lowest denominated coin is now 10 cents, all rounding relating to the formula should be done to the nearest 10 cents, including for annual liabilities.
Section 237 of the Act currently includes a list of when rounding does not apply to the nearest dollar. This section should also be amended to state instead when rounding should apply to a whole dollar, namely:
- all values applied to and included in the child expenditure table; and
- in the charging of late payment penalties.
Recommendation
That the submission be accepted.
Issue: Child support income amount
Submissions
Proposed new section 32 should be clarified to state that if a parent’s child support income amount is a negative, then it should be deemed to be nil.
Comment
Proposed new section 32 provides that a parent’s child support income amount is their adjusted taxable income minus their living allowance, dependent child allowance, and multi-group allowance.
Officials recommend that this section should be amended, in order to provide greater clarity, that if a parent’s child support income amount is a negative, then it should be deemed to be nil.
Recommendation
That the submission be accepted.
Issue: Requirements for estimating income
Submissions
The requirement to make and revoke estimations of income in writing under sections 40 and 42 of the Child Support Act should be relaxed so that they can also be made in other approved formats. Further, the requirement to provide information and evidence of the revised income to the Commissioner of Inland Revenue should be relaxed so that this evidence, although still required, would only need to be submitted upon request by the Commissioner of Inland Revenue.
Comment
It is currently a requirement under section 40(1) of the Child Support Act that estimates of income must be provided in writing. To make it easier for parents to estimate their income, officials recommend that this requirement for the estimate to be made in writing be removed. This would allow estimations to be made via other approved channels.
Section 40(2)(c) of the Child Support Act currently also states that the estimate must be accompanied by information and evidence to support the estimate. Officials recommend this requirement be relaxed so that the information and evidence, although still required, would only need to be submitted upon request by the Commissioner of Inland Revenue.
Finally, officials recommend that any revocation of an estimate of income (under section 42(1) and (2) of the Child Support Act) should not need to be in writing. This would allow revocation to be made via other approved channels.
Recommendation
That the submissions be accepted.
Issue: Overseas income
Submission
Proposed new section 33 should be clarified to make it clear that, for a person residing outside New Zealand, adjusted taxable income includes all income, whether taxable in their country of residence or not.
Comment
Section 39A of the Child Support Act currently allows the Commissioner of Inland Revenue, in making a formula assessment, to take into account any income the parent has derived in a country outside New Zealand that is taxable in that country (if that income can be ascertained). It also states that the Commissioner of Inland Revenue may apply the provisions of the Act with such modifications as may be necessary.
The bill proposes to amend section 39A(1) so that the income no longer has to actually be taxable in that country. However, the bill is not clear in proposed new section 33 (in relation to adjusted taxable income) that, for a person residing outside New Zealand, that adjusted taxable income includes all income, whether taxable in their country of residence or not. Officials therefore recommend that proposed new section 33 be clarified to make this clear.
Recommendation
That the submission be accepted.
Issue: Definition of “child support group”
Submission
The definition of “child support group” should be amended to exclude children who are not covered by the Child Support Act.
Comment
The new definition of “child support group” included in the bill is currently worded widely enough so that it could include children who are not covered by the Child Support Act. However, the policy intent was that it should only include children within the New Zealand child support scheme, and not private arrangements.
Officials therefore recommend that the definition of “child support group” be amended to exclude children who are not covered by the Child Support Act.
Recommendation
That the submission be accepted.
Issue: Discretionary relief for residual incremental penalty debt
Submission
Proposed new section 135GA should be amended to clarify that when section 180A applies, any residual penalties in relation to the debt in question may also be written off at the same time.
Comment
Proposed new section 180A allows the Commissioner of Inland Revenue to write off the benefit component of a child support debt if the receiving carer is or was a social security beneficiary and recovery would place the liable person in serious hardship.
Officials recommend that proposed new section 135GA be amended to clarify that when section 180A applies, any residual penalties in relation to this debt may also be written off at the same time.
Recommendation
That the submission be accepted.
Issue: Initial late payment penalty
Submission
Proposed new section 134(3) should be clarified to reflect that the second initial late payment penalty of 8 percent charged seven days after the due date under this section is calculated by reference to the financial support outstanding before the first initial late payment penalty of 2 percent charged under section 134(2) was applied.
Comment
Proposed new section 134 provides for the application of penalties for late payment of financial support debts.
Officials recommend that proposed new section 134(3) be clarified to reflect the intention that the second initial late payment penalty of 8 percent under this section, payable seven days after the due date, be calculated by reference to the financial support outstanding before the first initial late payment penalty of 2 percent under section 134(2) was applied.
Recommendation
That the submission be accepted.
Issue: Relief from ongoing incremental penalties if payment agreement in force
Submission
Proposed new section 135N(1)(c) should be clarified to reflect that when a deduction is made from a liable parent but an employer fails to pay the deduction to Inland Revenue, the liable parent can still be eligible for relief from on-going incremental penalties.
Comment
Proposed new section 135N(1) provides relief from on-going incremental penalties if a deduction notice is in force. The intention of section 135N(1)(c) is that the deduction should be made from a liable parent’s wages.
Officials recommend that proposed new section 135N(1)(c) should be clarified to reflect that when a deduction is made from a liable parent but an employer fails to pay the deduction to Inland Revenue, the liable parent is still entitled to relief from the on-going incremental penalties.
Recommendation
That the submission be accepted.
Issue: How the Commissioner establishes proportions of care – rounding
Submission
Proposed new section 15(6) should, for clarity, provide the method of rounding to be used.
Comment
Proposed new section 15(6) states that when establishing proportions of care the Commissioner of Inland Revenue must use only whole percentage figures.
Officials recommend that, for further certainty, the bill also states the method of rounding used. The method adopted would be one whereby:
- if the proportion of care is greater than 50 percent, then the rounding should go up (57.1 percent is rounded to 58 percent); and
- if the proportion of care is less than 50 percent, then the rounding should go down (13.9 percent is rounded to 13 percent).
Recommendation
That the submission be accepted.
Issue: Parents and receiving carers to advise Commissioner of changes
Submission
Proposed new section 82 should be amended to provide greater clarity when both parents provide notification.
Comment
Proposed new section 82, which provides for the effective dates of changes advised to the Commissioner of Inland Revenue, does not operate consistently for all shared-care cases.
Section 82 provides that when a liable parent informs Inland Revenue about a reduction in their care levels outside of the 28-day period, Inland Revenue makes the change from the date of the event. However, if the receiving carer informs Inland Revenue about a liable parent’s reduction in care, Inland Revenue makes the change from the date of notification. A potential conflict therefore exists if both provide notification on the same day.
Officials recommend that proposed new section 82 should be amended to clarify the outcome if both parents provide notification.
Recommendation
That the submission be accepted.
Issue: Care cost percentage table
Submission
Proposed new schedule 1 in the bill should be amended to reflect that when using care cost percentages, only whole percentages should be used, to make it easier to understand.
Comment
Proposed new schedule 1 in the bill contains the new care cost percentage table.
Officials recommend that consideration be given to amending this table to reflect that when using care cost percentages, only whole percentages are to be used. This may make it easier to understand.
Recommendation
That the submission be accepted.
Issue: How the Commissioner establishes proportions of care
Submission
Proposed new section 15 in the bill should clarify that the Commissioner of Inland Revenue, when establishing proportions of care, can reflect care arrangements made for periods in excess of a year.
Comment
Some care arrangements run for periods in excess of a year. Officials therefore recommend that section 15 should be amended to clarify that different time-periods can be used.
Recommendation
That the submission be accepted.
Issue: Offsetting of child support liabilities
Submission
Proposed new section 152B in the bill should be amended so that offsetting of liabilities can apply in split-care cases (this is allowed under section 34 of the current Child Support Act, but this section is proposed to be repealed by the bill).
Further, the ability to offset should not only be available to offset domestic New Zealand liabilities, but also be extended to situations when split-custody arrangements are in place in a trans-Tasman context – that is, when liabilities between two parents exist that are potentially subject to the reciprocal child support agreement between New Zealand and Australia.
Comment
Proposed new section 152B in the bill provides for the offsetting of child support payments between parents. It states that if two parents of a child are each liable to pay the other an amount payable under a formula assessment for child support, then the Commissioner of Inland Revenue may offset one liability against the other. As the proposed new formula inherently caters for offsetting in a shared-care situation, this section is no longer needed in a domestic context.
However, the bill also repeals current section 34 of the Child Support Act which deals with offsetting liabilities when there are split-custody situations (where the custody of two or more children is split between two parents.) As it would be beneficial for both parents and Inland Revenue, it is still preferable to offset liabilities in such cases. Officials therefore recommend that section 152B be amended so that it applies in split-care cases.
Officials further recommend that the ability to offset should not only be available to offset domestic New Zealand liabilities, but also be extended to split custody arrangements in place in a trans-Tasman context, where liabilities between two parents exist that are subject to the reciprocal child support agreement between New Zealand and Australia. For offsetting to be effective, enabling legislation in Australia will also be required in due course.
Recommendation
That the submission be accepted.
Issue: Use of the phrase “shared care”
Submission
Consideration should be given in the bill to changing the use of the phrase “shared care” to “recognised care”, when appropriate, for greater clarity.
Comment
Several submissions appeared to be under the misconception that 28 percent “shared care” represented equal care, rather than the level of care at which point some recognition is provided to parents for the costs they have incurred in providing a significant degree of care for their children.
In that context officials recommend that consideration be given in the bill to changing “shared care” to “recognised care”.
Recommendation
That the submission be accepted.
Issue: Care orders and agreements
Submission
Consideration should be given to changing the phrase “care orders or agreement” to “care agreement or orders” in the Child Support Act so there is an increased focus on the making of voluntary care agreements between parents.
Comment
The bill currently refers to “care order and agreement” (for example, in proposed new sections 2 and 15).
Officials recommend that consideration be given to reversing the wording to “care agreement or order” in the Child Support Act so that there is an increased focus on the making of voluntary care agreements.
Recommendation
That the submission be accepted.
Issue: How the Commissioner establishes proportions of care
Submission
Proposed new section 15(3), that provides that a carer of a qualifying child may challenge the application of section 15(1) and (2), should also apply to a parent (who may not be a carer).
Comment
Proposed new section 15(3) states that a carer of a qualifying child may challenge the application of section 15(1) and (2) in establishing proportions of care.
A parent (who is not a carer) should also be able to make such a challenge.
Recommendation
That the submission be accepted.
Issue: Income criteria for long-term prisoner exemption
Submission
Current section 89D and 89F of the Child Support Act should be amended to provide that an exemption from child support should still be provided when certain income is earned prior to a prisoner being imprisoned, but received afterwards.
Comment
Current section 89D of the Child Support Act provides that a long-term prisoner can be eligible for an exemption from the payment of financial support while they are imprisoned. Section 89F prevents such an exemption from applying if, at any time during a child support year, certain income criteria are not met. These include a requirement that the prisoner must not receive certain income after they are imprisoned.
Due to payments often being made in arrears, many beneficiaries and employed liable parents who are imprisoned in actual fact receive their final benefit payments or wages on or after the date they are imprisoned. As soon as such payments are received, the exemption noted above is not available for that child support year.
Officials therefore recommend that the Child Support Act be amended to provide that an exemption from child support should still be provided when certain income is earned prior to a prisoner being imprisoned, but received afterwards.
This will help increase prisoner compliance levels, as they will not be burdened with outstanding debts upon their release.
Recommendation
That the submission be accepted.
Issue: Requirements where there are no liable parents or receiving carers
Submission
It is recommended that the notification and other requirements be clarified in circumstances where there may not be any liable parents or receiving parents identified as a result of the application of the Child Support Act.
Recommendation
That the submission be accepted.
Issue: Minor drafting errors
Submission
The following minor drafting errors should be amended:
- Proposed new section 180A(1) should read “unpaid and in arrears” rather than “unpaid and in arrear”.
- The consequential amendment to the existing section 105(2)(b)(i) which changes the term “qualifying custodian” to “receiving carer” is not required as clause 26 in the bill repeals and substitutes this section.
Recommendation
That the submission be accepted.