Child Support

What financial help am I entitled to?

When couples separate, the person responsible for most of the day-to-day care of the children, is likely to need some financial help from the other party. In many cases, parents are able to agree the amount that will be contributed. This is called a ‘Voluntary Agreement’. In this instance one party might set up a regular payment for the amount, and this might be recorded in an agreement between the two parties.

In cases where parties cannot agree, or where someone fails to make regular payments, the New Zealand Inland Revenue Department (IRD) administers the ‘Child Support Scheme’, to ensure regular payments are made.

 

The IRD Child Support Scheme

The scheme applies to:

  • couples with children who have split up
  • two people who have children but aren’t living together.

It aims to ensure:

  • parents take financial responsibility for their children when marriages and relationships end
  • financial contributions from paying parents help to offset the cost of benefits, such as the Domestic Purposes Benefit.

In the scheme, the parent who lives with their child is called the ‘custodian’. The parent who does not live with their child is called the ‘paying parent’. There are rules that govern the amount of financial support the paying parent must pay.

 

How does the Child Support Scheme work?

Firstly, the custodial parent should apply to the IRD for child support.

Then the IRD uses a standard formula to calculate how much child support must be paid by the paying parent. The formula starts with the paying parent’s taxable income, deducts a set living allowance (the amount depends on their living arrangements, such as if they have a partner and how many children live with them), and multiplies the result by a percentage, based on the number of children the paying parent pays child support for.

The annual amount is divided into a monthly amount and the IRD notifies the parties of the amount that will be paid. The IRD will deduct this amount from the paying parent’s income and distribute it to the custodial parent each month. If the custodial parent is a beneficiary, then the IRD passes the funds to the government to offset the benefit payments.

To qualify for child support, the child must be:

  • under 19 years of age
  • a New Zealand citizen or ‘ordinary resident’ in New Zealand
  • not married or in a de facto relationship
  • financially dependent, that is, not working more than 30 hours a week on average, or receiving a benefit or student allowance.

 

Departure Orders

In some circumstances, the IRD or the Court will make a Departure Order, which allows child support to be assessed differently from the standard formula assessment. This might occur if for example, either parent’s ability to provide financial support is significantly less because they have someone else to support, or the child has special needs which require more financial support. The IRD must be satisfied that the Departure Order is fair to the child and both parents.

 

Voluntary agreements

A voluntary agreement is where the two parties agree on the financial contributions, rather than have the amount determined by the IRD’s formula assessment. When a voluntary agreement is made, it can be registered with the IRD and should state:

  • that the liable parent accepts he or she must pay child support
  • the amount to be paid
  • how often the payments will be
  • any extra financial commitments to be made by the liable parent.

If a custodial parent is on a benefit, payments are made to the government to offset the benefit payments. In this instance, a voluntary agreement cannot be made and the IRD’s formula assessment must be applied.

 

Can the IRD enforce payment?

Yes, if a liable parent doesn’t pay the amount of child support required, there are a number of ways Inland Revenue can enforce payment:

  • they can issue a ‘deduction notice’ so that the money will be taken out of the liable parent’s benefit, wages or bank account
  • they can add penalties to what the liable parent owes
  • they can take Court action in the same way that any creditor can apply to the Court to enforce a debt.

 

Shared and split care

If both parents share the care of the child (at least 40% of the time each), then both parents are assessed with a modified formula, and the parent with the higher liability pays the difference to the other.

If care is split, for example if there are two children and one parent has one child all the time and the other parent has the other, then both parents are assessed with the standard formula. The parent with the higher liability pays the difference to the other.

 

How can we help?

We assist clients to agree and document Voluntary Agreements. This is often done as part of a Parenting Agreement or Parenting Plan. We also work with clients where a departure order has been made or where the situation is complex and they need advice. We work with custodial and paying parents.