Dads owe $1.7 billion for children

BY STEVE HOPKINS

Child support is to get a shake-up in the New Year after revelations eligible parents owe more than $1.7 billion in payments.

Revenue minister Peter Dunne told Sunday News he had been "extremely worried" about unpaid child support for several years and was working on proposals to take to Cabinet early next year.

"The thing we often forget in the child-support debate is that it's not really about the parents – it's about the kids, and if the payments aren't being made, then the children are suffering," Dunne said.

"The paramount responsibility is the money getting to the kids because the kids don't choose their parents or the circumstances, yet they very much are the victims of them."

The United Future leader said payment – or non-payment – of child support by the 175,200 liable parents had a "significant" effect on recipient children's quality of life.

Because a quarter of this year's payments alone were overdue, many Kiwi families would be struggling this Christmas, he said.

Dunne wouldn't detail his plans for an overhaul of the scheme – administered by the IRD on behalf of 277,000 Kiwi kids – because they're still being "developed".

But the minister said he had been monitoring a number of schemes introduced in Australia.

Changes to the New Zealand child-support scheme could include: basing payments on the cost of raising children rather than parents' income, better tracking of debtors internationally, and better incentives for parents to meet payments.

Consideration would also be given to changes of circumstances for custodial parents, such as their returning to the workforce early or being in new relationships "where they could be financially better off than they were before".

According to figures exclusively obtained by Sunday News from the IRD, as of October 32% (64,824) of liable parents weren't making their child-support payments in full or on time.

More than $850m is owed by parents who are no longer required to pay child support but have outstanding debt and a further $860m is owed by parents currently behind on their payments.

Of $1.7b owed, $1.2b was the result of late payment penalties and interest.

Since the child-support scheme began in 1992, IRD has recovered 89% of all payments – $3.9b of $4.4b.

One-third of the total debt – more than $500m – was owed by 21,024 liable parents who lived overseas, "some of whom may not be aware that they have a liability under the scheme, because we've been unable to trace them," an IRD spokesperson said.

Information sharing between IRD and the New Zealand Customs Service led to an alert system being set up in August 2008 for debtors entering and leaving the country.

New Zealand also has a joint agreement with Australia whereby "we track each other's cases in each other's countries", Dunne said.

The minister is looking to extend the agreements internationally, "as this isn't just a New Zealand problem, it's an international one".

Dunne said a lot of emphasis had been placed in recent years on trying to make it easier for parents to meet their financial obligations – such as alleviating late-payment penalties for debtors who are "at least making an effort" to make payments or part payments.

The IRD spokesperson said it was "not appropriate" to discuss whether child-support debt levels were acceptable.

But the spokesperson said 70% of new debt cases were resolved by IRD within 12 months and 74% of liability for the current financial year had been collected.

The Tax Administration Act prevents IRD from discussing individual debt but the IRD spokesperson said the department expected debt to increase because there were "limited circumstances under which child-support liability could be written off".

Since 2006, IRD has allowed a partial write-off of late-payment penalties, provided a liable parent complies with their payment programme.

During the 2008-09 financial year, IRD wrote off $21.7m for 21,583 parents.

Dunne said recovering child support was complicated by the emotions involved in relationship breakups.

Often child-support debtors had limited access to the children they were making payments for, or withheld their payments due to bitterness at their former partner.

"The argument we hear quite a lot is, `I'm paying quite a lot of child support but why should I because I never get to see the kids?"'

Dunne said he understood that argument but parents' obligations to look after their children over-rode all arguments against paying child support.

He hoped more parents could come to voluntary agreements, as IRD was often caught in the middle in a "no-win situation"..

Dunne encouraged both those struggling to make their payments and those families due overdue support to contact IRD.

- © Fairfax NZ News