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Inland Revenue

Tax Policy

Chapter 9 - Other issues for consideration

This chapter discusses a number of other issues for future consideration on which submissions are welcome:

  • whether a test should be introduced restricting who can claim child support;
  • whether paying parents should be able to receive “credits” against their child support liability by directly meeting significant costs of raising the child;
  • whether re-establishment costs should be taken into account in establishing income for child support purposes in certain circumstances; 
  • whether child support payments should automatically cease when the child turns 18, unless the child is still in full-time secondary education, in which case payments would cease when the child leaves school; and
  • passing on child support payments to the receiving parent.

9.1 This chapter discusses a range of other issues that affect the amount of child support paid or received.

Determining who can claim child support

9.2 Currently, a person can claim child support if they are the sole or principal provider of care for a child (or share that role equally with someone else). There are no other specific requirements or tests that must be satisfied. When an application for child support has been properly made, therefore, the Commissioner of Inland Revenue is initially bound to accept it regardless of circumstances (although the parent who is, on the face of it, liable for child support can object and lodge an appeal). A caregiver receiving certain Government benefits relating to a child must, under law, make an application for child support.

9.3 At times, views may differ about whether a person should be able to claim child support – for example, in certain circumstances when a child leaves home to live with a person, other than a parent or other legal custodian of the child, who is not receiving a benefit relating to that child.

9.4 A specific test could therefore be introduced that restricts who is able to claim child support. This could, for example, restrict the ability to claim child support to either:

  • a parent of a child; or
  • someone who has legal custody of a child; or
  • someone who is entitled to receive a Government benefit for a child.

9.5 There could, of course, be disadvantages in introducing such a test, as there could likely be some individual circumstances when it would not be in the best interests of a child to prevent a caregiver from claiming child support when they do not meet these requirements. However, the question is finding the right balance between the two considerations.

9.6 Inland Revenue, being predominantly a collection agency, is not best placed to make judgements that determine who a child should ideally be living with. Any changes in this area would therefore have to be very carefully considered in conjunction with the Ministries of Social Development and Justice. However, views are sought as part of this review on whether such a change should be considered and, if so, who should or should not be able to claim child support for a child.

Prescribed payments

9.7 In Australia, the Child Support Agency can credit certain payments towards a paying parent’s child support liability. Credit can be given up to a maximum of 30 percent of the ongoing liability provided the balance of child support is paid as it becomes due. This facility is not, however, available to parents whose child support liability has been adjusted to reflect regular or shared care.

9.8 The types of payments that can be credited in this way are listed or “prescribed” by regulation. They are:

  • childcare costs for the relevant child; 
  • fees charged by a school or preschool for that child; 
  • amounts payable for uniforms and books prescribed by a school or preschool for that child;
  • fees for essential medical and dental services for that child; 
  • the receiving parent’s share of amounts payable for rent or a security bond for the receiving parent’s home;
  • the receiving parent’s share of repayments on a loan that financed his or her home; and
  • costs to the receiving parent of obtaining and running a motor vehicle, including repairs and standing costs.

9.9 Views are sought on whether this option would be useful in New Zealand.

9.10 Prescribed payments may provide a greater incentive to pay child support as a paying parent may be more comfortable that the payment (or at least part of it) was directly benefiting the child according to the paying parent’s desires for the child’s upbringing. For a payment to be recognised, however, it would clearly need to have both parents’ agreement as parents’ views about expenditure choices may differ. For example, one parent may wish to send their child to a private school and be willing to pay the school fees while the other parent may prefer a state school.

9.11 Any prescribed payment system would not be available if the caregiver was solely receiving a sole parent benefit as the Government is already in effect providing contributions towards the payments as part of that benefit. In these circumstances, the making of prescribed payments by the paying parent would not offset the Government’s costs of providing the benefit as currently occurs.

Recognising re-establishment costs through exempting some income

9.12 Sometimes a paying or receiving parent may take on additional employment or overtime work to re-establish themselves after a relationship separation – for example, to assist in buying an alternative home where their children can live or stay.

9.13 Under the Australian child support scheme, parents who are paying or receiving child support have, since 1 July 2008, been able to apply for their assessment to be amended to exclude additional income from overtime or a second job for up to three years from their separation. Additional requirements are:

  • that the income was earned in accordance with a pattern that was established after the parents first separated and is of a kind that it is reasonable to expect would not have been earned in the ordinary course of events; and 
  • the excluded income is no more than 30 percent of the parent’s taxable income.

9.14 Establishing that the pattern of workforce participation has changed can sometimes be difficult. A parent may, for example, have undertaken overtime from time to time before separation. In other cases, the change in pattern will be more obvious.

9.15 Furthermore, the adjustment is not done through the formula because parents’ circumstances can vary substantially and a child support liability can run for substantially more than three years. Instead, the Australian child support scheme takes re-establishment costs into consideration as a ground for the equivalent of an administrative review.

9.16 Currently, in New Zealand, secondary employment and overtime are automatically included in the formula calculation. Re-establishing oneself is not an administrative review ground in itself.

9.17 Views are sought on whether, if both parents income is to be taken into account in calculating a child support liability, re-establishment costs should be made a ground for an administrative review on a similar basis to that adopted in Australia.

Qualifying age of children

9.18 Views are sought on whether the maximum age at which child support ceases should be changed.

9.19 Child support is normally payable until a child reaches the age of 19 years but ceases earlier if:

  • the child becomes financially independent (defined as either being in full employment, or receiving a state-supported benefit or a student allowance);
  • is living in the nature of marriage; or
  • ceases to be ordinarily resident in New Zealand and is not a New Zealand citizen.

9.20 Some receiving parents consider the cut-off age should be higher, say 25, to provide for students in tertiary education. They may feel that, in the absence of continued payments from the paying parent, they do not have the financial means to assist their children through tertiary education, even though they feel there is a real need for them to do so. Conversely, some paying parents consider that child support should automatically cease earlier – for example, when the child reaches 18 or leaves school.

9.21 The qualifying age was fixed at 19 because of the increasing number of young people who are continuing secondary education past their eighteenth birthday. (In 2008 over 22,000 young people turned 18 in year 13 of their schooling and went on to complete that year’s education.) At that stage an individual is generally considered to be an adult (because they are eligible to vote, for example), and are no longer dependent on parental support.

9.22 The student loan and student allowances schemes are available to provide assistance after high school. Even if a student does not qualify for a student allowance because of his or her parents’ combined income, a student loan would still be available.

9.23 There may, therefore, be a case for ceasing payment when students leave secondary school rather than waiting until they turn 19 in their first year at university.

9.24 The latest age at which child support ceases should not be before the latest age at which the sole parent benefits cease, the main benefit being the domestic purposes benefit which generally ceases when the child turns 18. The unsupported child’s benefit (paid to carers of a child whose parents cannot care for them because of family breakdown) ceases when the child turns 19.

9.25 The Government is interested in submissions on whether the qualifying age should be changed so that it automatically ends at age 18 unless the child is still in full-time secondary education, in which case the child would cease to be a qualifying child upon leaving school.

Passing on child support payments to the receiving parent (“pass-on”)

9.26 Government-provided welfare benefits give certainty to sole parents about the amount that they will receive to assist them in raising their children. However, in these circumstances some paying parents maintain that there is little incentive for them to pay child support given that their payments are generally retained by the Crown up to the amount of the benefit paid.[40] The children are no better or worse off as a result of the child support payment because the benefit is paid regardless.

9.27 “Pass-on” is the term used to describe the situation when some or all of the payments, instead of being retained by the Crown, are passed on to the beneficiary caregiver. A number of countries provide pass-on.[41] Pass-on, depending on how it operates in practice, can provide beneficiaries with more money to help raise their children. It has also been suggested that pass-on may increase the incentive to pay child support and improve compliance.

9.28 Another advantage is that there may be a greater incentive for primary caregivers who are beneficiaries to trace paying parents and to contest the level of contribution if this is considered inadequate or unjust.

9.29 Disadvantages with pass-on are:

  • Passing on child support contributions to beneficiaries would involve a significant fiscal loss to the Government unless benefits were netted off on the basis that the benefits included an amount for raising children. 
  • Netting-off benefit payments would create uncertainty, and in some cases hardship, for beneficiaries and the children involved, as the overall amount they received would be dependent on whether and how promptly the other parent paid his or her child support contribution. 
  • It does not ensure that child support payments are used on the child, which may be crucial in increasing the incentive to pay. Tagged payments or vouchers would achieve this but are, with the exception of prescribed payments (discussed earlier), largely impractical. 
  • The costs that would be incurred by Government in administering the additional payments that pass-on would necessitate.

9.30 Changing to a system where a beneficiary receives some or all of the child support payment would be a major shift in the philosophical basis of New Zealand’s child support scheme. Some countries that have pass-on have used it to emphasise the welfare of the children where child poverty has been the central concern. However, payment of higher benefits would seem to be an administratively less complex alternative in such circumstances.

9.31 It is not clear what effect pass-on would have on parents’ decisions to participate in the workforce. Supplementing the benefit by passing on child support payments might discourage a receiving parent from taking up employment because the financial impact of moving away from a benefit would be greater. Under the current scheme, the receipt of child support payments partly cushions the loss of the benefit when the receiving parent takes up employment.

9.32 As noted earlier in this document, New Zealand’s child support collection rate compares well with other countries, lessening the incentive to introduce pass-on without strong evidence to support such a change.

9.33 On balance, it is considered that the disadvantages of passing on child support payments outweigh any likely benefits and no changes are warranted at this time. It may be a matter best considered in light of further evidence and analysis on its likely impact.


40 There are about 2,000 cases where the child support contribution exceeds the benefit and, therefore, the surplus is passed on. This represents around 3 percent of the situations where the primary caregiver is a beneficiary.

41 For example, Britainrecently introduced partial pass-on as part of various reforms to its child support scheme and has noted an increase in compliance. In Australia, child support amounts are passed on but may result in a reduced benefit, depending on their magnitude.