Peter Dunne, Revenue Minister in a National Government has proposed changes to the Child Support Act. These changes have been the subject of much comment on MENZ.

To assist making submissions the Select Committee that reviews this bill, over the next couple of weeks I will post an analysis of the changes and the reason for them.

According to Dunne’s Speech, what is changing?

The changes included:
“¢ The number of nights a year used to determine shared care being reduced from 40 percent to 28 percent of nights;
“¢ Having child support payments deducted directly from the paying parent’s pay-packet; and
“¢ Changing the penalty rules for parents defaulting on their payments so they are not so punitive as to discourage parents from resuming payments……..
– be based on more up-to-date estimated expenditures for raising a child;
“¢ recognise shared care of a child at lower levels than the current 40 percent of nights test – instead, shared care will be recognised using a tiered system starting at 28 percent of nights; and
“¢ take the income of both parents into account, rather that just the paying parent’s income….
“¢ changing the definition of “income” for child support purposes so that it excludes tax losses and includes certain trust income;
“¢ making it compulsory for child support payments to be automatically deducted from salary and wages;
“¢ changing the late payment penalty rates for child support; and
“¢ relaxing the circumstances in which penalties can be written off (for example, when a payment arrangement is entered into).

To understand the driving source of the changes I will start with;
“¢ making it compulsory for child support payments to be automatically deducted from salary and wages;

What is the explanation (Spin) for this change? (Taken from Dunne’s Speech)

Mr Dunne said parents who believed the system was fundamentally fair would be more likely to comply with their obligations, but in the end, all parents were responsible for their children and society has a right to expect children to be supported by their parents.
Paying parents will have their payments automatically deducted from their salary to ensure that as many child support payments as possible are made, and made on time.

Is it fair that all salary and wage earners must have compulsory automatic deductions?

It is recognised that some paying parents will have concerns with this, for example about their employers knowing that they are making child support contributions, however the public interest in operating an effective child support scheme should outweigh these individual concerns.

The Analysis

The proposed changes came from an “IRD Officials Review” of the Child Support Act (CSA) and its hardly surprising that tax officials would suggest taxing at source. Deduction at source is the ultimate compliance tool for a Tax Collector, an administrative dream that makes non compliance virtually impossible. Compliance and collection are the driving force behind these changes, that’s what has always driven tax collectors.

Ironically IRD already has the power to remove Child Tax from your wages, within clear predefined boundaries and many of you will have experienced this. This changes the ballgame and puts Child Tax in place as a soft revenue target. By soft I mean Politicians will overtime continue to increase the assessments because they can, because we let them get away with it. When deduction at source is embedded this will see the unchanged fundamental flaws of this type of child tax system embedded in law for the next 30 years. No government wants to give up revenue and remember most Child Tax goes to State Coffers, for benifit recovery, not the children.

Lets not forget we all pay tax already, that tax is supposed to cover the costs of Government services and benifits, Peter Dunne is enshrining double taxation for seperated parents. Lets not forget to be grateful.

That’s enough to start a discussion.

Regards
Scrap