Announcement from Government on 17 July 2017 in Relation to Child Support

Changes Proposed

Summary

  1. The Government is changing the law so that child support payments will be automatically deducted from parents’ wages or salaries.
  2. About three quarters of people who pay child support – and only receive salary and wage income – already elect to have payments automatically deducted from their salary and wages. If the government proposal comes into effect, child support payer receiving salary and wage income would have no choice but to have the payments automatically deducted from their pay by their employer.
  3. Child support payments will also be based on all income made by parents. Interestingly, this may include for example, anything held in Trusts.

There will be more frequent assessments of the income of the payer.  Currently, a person’s child support obligations are assessed once a year and divided into 12 equal monthly payments. The Government is now considering whether deductions should reflect the payer’s actual income each month instead of an average amount over 12 months.

Comment

  1. Overall, the proposed changes are a step in the right direction to complement Inland Revenue’s business transformation programme which was introduced to deliver a more “real time” system.
  2. The disadvantage is that payments will be less predictable for the receiver or primary caregiver of the child as it may be a different amount each month based on the actual income of the payer.
  3. The proposed “all income” inclusion may also be challenging to enforce. For example, it will be interesting to see how Inland Revenue is to get information from a third party such as banks or find out all information in relation to a Family Trust and the beneficiaries. 

Timeframe

  1. The Revenue Minister, Judith Collins said any changes that will be made would be introduced over a couple of years with law changes likely to go through Parliament next year.

Conclusion

  1. The current changes are to be welcomed and they are an attempt to streamline the system. The payment of the correct child support entitlements is currently a source of frequent litigation between parents by way of administrative reviews.
  2. The automatic deduction of salary and wages, in my opinion is to be welcomed.