Retrospective Departure Orders an Update
The previous post The Wrath of IRDrequires an update.
First the good news. After years of parental alienation and tens of thousands of dollars in court costs this Dad is finally beginning to rebuild the relationship with his children. The message here is never give up.
The Dad has secured legal representation and while he bears up well this action by IRD is placing a severe strain on his personal life.
This case is going to see an attack made,with the full force of Crown Law and the IRD, on the the long established principle that a departure order cannot be retrospective.
In plain English : If you are subject to an administrative review you are part of the departure order process. Departure order is the legal term for the mechanism used by an administrative review to create a variation to the formula assessment.In most cases the order is upward and you are required to pay more Child Support.
The departure order cannot (except in very limited circumstances) be retrospective. This means that IRD cannot reopen and vary assessments from previous years. If IRD could, via a departure order, open up previous years to reassessment then any custodial or liable parent could suddenly find themselves reassessed for any year they paid or received child support(TAX).
The likely effect of retrospective departure orders on anyone who is or who has been a paying or a receiving parent
I want this to be very clear.
The law on administrative reviews has changed. Before only a liable or custodial parent could initiate an administrative review. The law that Peter Dunne, Minister Responsible for Child Support and United Future Leader, pushed through Parliament gave IRD the power to initiate administrative reviews. To quote IRD
The Commissioner of Inland Revenue may decide to review an assessment if an investigation into a paying parent’s financial affairs shows that their assessment doesn’t accurately reflect their ability to provide financial support to their children. This is called a Commissioner review.
If you are a liable parent it opens you up to having a child support income plucked out of the air.General accounting principles do not apply when creating Child Support Income.
Some examples of where this may be applied for an upward departure order
*You are self employed
*You have an investment property
*You have an employer who matches your contribution to Kiwi Saver or a superannuation scheme.
*You receive tax credits form the Kiwi Saver
*Any situation where IRD believes that formula assessment does not reelect your perceived ability to pay.
*You are father of a child that you have no knowledge of you child until IRD demand child support(Tax).
If IRD are successful in achieving their goal of retrospective departure orders and this is then combined with their ability to seek a departure order will cause many parents extreme financial and personal hardship.
If IRD, with all the resources of the Crown backing, them are successful in achieving their goal of retrospective departure order then it allows any liable or custodial parent license play havoc with a parents life. A custodial or liable parents financial position will be extremely insecure if they cannot rely upon the protection of previous years child support assessments being correct and unalterable.
Yes its a two edged sword as TR V The Commissioner of Inland Revenue shows but it is my view that retrospective departure orders will only be allowed to be upward and the chances of liable parent “recovering overpayment of child support” via a downward departure would be slim.
It will be open season on reopening previous years assessments to collect more revenue if IRD’s challenge is successful.
The Case Law and IRD Administration
There are two published and one unpublished decision from the High Court that deal with the question of retrospective departure orders.Two cases clearly come out against retrospective departures one allows retrospective departure in very limited circumstances.
IRD have for a number of years not issued retrospective departures via administrative review.Their view of the law has been that retrospective departure orders should not be granted.
There has been a direction to change this position and they see their best chance at collecting an increased amount of Child Support (TAX).
What Next ?
The hearing of this case is likely to occur in Wellington at the High Court. I will keep you posted on planned activity as soon as the date is confirmed.
Please note that the issue here is should retrospective departure orders be allowed and what the effect will be on parents if they cannot be guaranteed that previous years child support (TAX) assessments are correct and reliable.