Child Support Amendment Bill
Officials' report to the Social Services and Community Committee on submissions received on the Bill
February 2001
OVERVIEW
- Overview of the Bill
- Previous consultation on proposals in the Bill
- Summary of the key themes from submissions on the Bill
- Recommended changes to the Bill
OVERVIEW OF THE OFFICIALS’ REPORT
This report has four parts:
- A short overview of the Child Support Amendment Bill (the Bill), and a brief background on previous consultation on the proposals (pages 9–10).
- A high-level summary of key themes of submissions received on the Bill (pages 10–11).
- A table showing Inland Revenue’s recommended changes to the Bill, including matters raised by officials (page 12).
- Comment on each of the issues raised by submitters. The ordering of issues in this report follows the relevant order in the Child Support Act 1991 (pages 13–104).
Overview of the Bill
The proposals in the Bill are aimed at reducing complexity, improving fairness, increasing compliance with the Child Support Act 1991, and improving Inland Revenue’s administration of the scheme. These changes are made possible by the move of child support to Inland Revenue’s new systems and processes as part of Inland Revenue’s Business Transformation programme. This Bill therefore supports that move.
The proposals:
- simplify the penalty rules
- introduce automatic deductions of financial support from source deduction payments made by employers to newly liable parents
- introduce a time bar of four years on reassessments of child support for past years
- include interest and dividends in child support assessments for salary and wage earners; and move from taxable income to net income, preventing carried forward tax losses lowering income for child support purposes, and
- make technical amendments to assist with the administration of the scheme.
Inland Revenue’s regulatory impact assessment and commentary on the Bill are available on the tax policy website.[1] The commentary is intended to provide background information, explanations of the proposals, and examples of how the proposals (if enacted) would be expected to apply.
On 9 July 2020, the Minister of Revenue released Supplementary Order Paper No 538 to the Bill (the SOP). The SOP proposes to repeal incremental penalties on overdue child support and simplify the penalty write-off rules. Inland Revenue’s supplementary analysis report and commentary on the SOP are available on the tax policy website.[2]
Previous consultation on proposals in the Bill
Between 2015 and 2017, the then Government released a series of discussion documents. These documents considered options to improve tax administration, as part of developing Inland Revenue’s multi-year Business Transformation (BT) programme. This transformation has largely been completed. Child support will move to the new platform in 2021.
Most of the key proposals in this Bill were originally proposed in the 2017 Government discussion document Making Tax Simpler – Better administration of social policy.[3]
Targeted consultation on the proposal to introduce a time bar was undertaken in 2019 with:
- National Beneficiary Advocacy Consultative Group
- The Federation of Budget Advisors
- Citizens Advice Bureau, and
- Chartered Accountants Australia and New Zealand.
The Legislative Design and Advisory Committee was consulted in relation to the proposed discretionary power for Inland Revenue to modify an aspect of the child support assessment calculation when unintended outcomes are reached by the formula.
Summary of the key themes from submissions on the Bill
This report covers 50 submissions on the Bill and the SOP.
Eight submitters were organisations:
- Birthright New Zealand
- CCS Disability Action
- Child Advocacy New Zealand
- the National Beneficiary Advocacy Consultative Group
- National Council of Women of New Zealand
- New Zealand Law Society
- the Office of the Children’s Commissioner, and
- the Office of the Privacy Commissioner.
The other submissions were from individuals, or the submitter did not identify whether they were an individual or a group. Many submitters indicated that they had personal experience of the child support scheme, usually as a receiving carer or liable parent.
Submissions on proposals in the Bill
Four submitters indicated that they generally supported the intent of the Bill.
Some submissions commented on the process of the Bill and the development of legislation, and Inland Revenue’s provision of information about the proposed changes. These are discussed on pages 97–102 of this report.
Other submissions commented on the:
- maximum age of a qualifying child (pages 20–21)
- definition of income (pages 40–49)
- time bar (pages 63–65)
- exemption from paying child support due to long term illness (page 66)
- automatic deductions from wage and salary (pages 73–74), and
- grace period (page 79).
Submissions on child support issues not contained in the Bill
Many of the submissions raised issues with child support policy that are not related to the proposals in the Bill. The proposals in this Bill are focussed on supporting the move of child support to Inland Revenue’s new system. Fundamental changes to the child support scheme were not proposed as part of this Bill.
The issues raised by submitters that were not related to the proposals in the Bill include submissions on how child support is calculated.
A number of issues raised by submitters were based on misunderstandings of the current legislation. These misunderstandings occurred particularly about the child support formula. For example, some submitters were not aware that the formula now takes into account both parents’ income. The formula was comprehensively revised by the Child Support Amendment Act 2013. The revised formula takes into account both parents’ income, up-to-date costs of raising children, and a greater range of care levels.
When applicable, we have commented on these issues, addressing misunderstandings and explaining the reasoning behind the policy.
Submissions on issues not related to child support
Some submitters commented on issues related to the separation of parents but not related to child support. These included Family Court and legal cost issues. These are not within the scope of Inland Revenue’s functions and we have not commented on them.
Recommended changes to the Bill
Table 1 lists the changes to the Bill recommended by Inland Revenue following consideration of submissions and includes matters raised by officials.
Table 1: Changes to the Bill recommended by Inland Revenue
| Number | Clause(s) | Recommendation | Page number in this report |
|---|---|---|---|
| 1 | 2 | Change the start date for the Bill from 1 April 2021 to 1 April 2022 or an earlier date as set by Order in Council. | 16 |
| 2 | 4 | Ensure that the new definition of “social security beneficiary” applies retrospectively from 26 November 2018, which is when the previous definition was repealed from the Child Support Act 1991. | 18 |
| 3 | 4 | Correct the cross-reference in clause 4(2). | 19 |
| 4 | 6 | Change “reasons outside a person’s control” to “reasonable cause” to align wording with other similar provisions. | 29 |
| 5 | 8, 10 | Clarify the wording of “no child expenditure table applies”. | 32 |
| 6 | 14 | Amend the definition of “election period” so that an election period covers the correct span of time. | 57 |
| 7 | 4 | Amend the definition of “year-to-date income” so that year-to-date income is derived from the correct period. | 59 |
| 8 | 18 | Ensure that the integrity exceptions in sections 82(2)(a)(i) and (ii) apply to new section 81A (timeframe for notification of existing circumstances). | 61 |
| 9 | 44 | Remove the amendment to the definition of “relevant payments” in section 135JA(1) as it is redundant. | 82 |
| 10 | 46 | Give a person 30 days in which to pay when offsetting reverses and results in an additional amount to pay, and the reversal is not due to a reassessment. | 83 |
| 11 | 48 | Correct the cross-reference in clause 15(2) of schedule 2 of the Bill to section 5(3) of the Child Support Act 1991 to refer to section 5(4). | 95 |
| 12 | - | Include the Supplementary Order Paper in the revision tracked Bill. | 75 |
| 13 | - | Introduce a transitional provision (until the grace period comes into effect) allowing for the write-off of penalties in the same circumstance as the current section 135GB. | 80 |
| 14 | - | Allow for the write-off of penalties when child support assessed has also been written off as it is an inefficient use of Inland Revenue’s resources to collect the amounts. | 81 |