Child Support Amendment Bill

Child Support Amendment Bill

Government Bill

228—1

Explanatory note

General policy statement

This Bill amends the Child Support Act 1991.

Broadly, the policy proposals in the Bill are—

  • the simplification of penalty rules by, among other things,—

    • moving the imposition of the second phase of the initial penalty to 28 days after the initial due date; and

    • repealing the rule that provides that the minimum penalty imposed is $5; and

    • introducing a grace period of 60 days from the first due date during which a newly liable person, or a person returning to the child support scheme, will not be charged late payment penalties:

  • introducing payment of financial support by compulsory deduction from source deduction payments made by an employer to newly liable persons:

  • imposing a time bar of 4 years that will—

    • prevent reassessments for periods outside the 4-year period; and

    • start 4 years after the end of the relevant child support year; and

    • be subject to specific exceptions to address concerns about fairness (such as whether the information provided by a person is fraudulent or wilfully misleading):

  • inserting a definition of income, which will—

    • widen the definition of income used for child support purposes to include investment income such as dividends and interest; and

    • move the definition of income used for child support purposes from a taxable income to a net income base.

The Bill also contains technical amendments to assist with the administration of the child support scheme, including when working with customers who have unusual circumstances. These include—

  • providing that when a person joins the child support scheme, an estimation can be backdated to the start of the assessment if received within 28 days of notification of the assessment:

  • updating the end-of-year reconciliation rules for estimates to reflect the income over the period an estimate applies for:

  • replacing the offsetting departure ground with a provision permitting Inland Revenue to offset the amount owed between 2 parents:

  • repealing the urgent maintenance order provisions:

  • amending the prisoner exemption to allow it to be granted to a liable person who is the overseas equivalent of a New Zealand prisoner in legal custody under the Corrections Act 2004:

  • amending the hospital exemption to allow it to be granted to a liable person in an overseas hospital or residential care facility:

  • introducing an exemption for persons suffering from long-term periods of illness:

  • repealing the mixed-age expenditure table:

  • providing Inland Revenue with a discretion to adjust child expenditure calculations in situations where complex care arrangements for children in the same calculation are not adequately accounted for by the usual method:

  • clarifying the legislation to state explicitly that a child support assessment should end when a child leaves State care:

  • introducing time constraints of 60 days for the provision of court orders of parentage for the backdating of child support assessments:

  • providing that a person has 28 days from the date on which they are first notified of an assessment to advise Inland Revenue of existing living circumstances, otherwise the circumstances are effective from the date of application for child support:

  • providing that a child should not be considered financially independent for child support purposes unless they are aged at least 16:

  • providing that child support should cease at the end of the calendar year in which a child turns 18, if that child attends school up until the end of the school year:

  • amending the definition of residency, for child support purposes, to enable a person’s intentions to be taken into account.

The child support scheme will move to Inland Revenue’s new systems and processes in April 2021 (release 5 of Inland Revenue’s multi-year Business Transformation). This move creates opportunities to improve the administration of the child support scheme.

In 2017, the previous Government released a discussion document Making Tax Simpler: Better administration of social policy (the discussion document). The discussion document explored proposals for improving the way social policy entitlements and obligations, including child support, are administered by Inland Revenue.

The focus of the discussion document was not on changing the fundamental policy settings, but rather improving the administration of the scheme by taking advantage of the opportunity offered by the modernisation of Inland Revenue’s systems.

The discussion document set out a number of problems with the child support scheme that require legislative change. Some of the problems result in unfairness, while others have arisen because the situation was not contemplated or the person’s situation is unusual or complex. Those problems can lead to dissatisfaction with the scheme and reduced compliance. Adding to this, the rules for penalties are overly punitive and complex and work more as a disincentive rather than an incentive to pay.

The proposals in the Bill are aimed at, with respect to the scheme,—

  • improving administration; and

  • reducing complexity; and

  • improving fairness; and

  • increasing compliance.

The following is a brief summary of the primary policy measures contained in this Bill. A comprehensive explanation of the policy items is provided in a commentary on the Bill that is available at https://taxpolicy.ird.govt.nz/publications/2020-commentary-child-support-bill/overview

Changes to penalty rules
Change to timing of imposition of second stage of initial late payment penalty

The Bill proposes moving the second phase of the initial penalty to 28 days after the due date, to give Inland Revenue time to contact the customer with the aim of working with the person to get them back on track.

Removal of minimum $5 penalty rule

The $5 minimum penalty rule will no longer apply. The penalty charged at the expiry of the due date will be 2% of the outstanding balance. That will ensure that the 2% penalty imposed is in proportion to the amount outstanding.

Introduction of grace period

For people new to the child support scheme, a grace period will apply during which late payment penalties will not be charged. The grace period will start on the first due date and will apply for the following 60 days. It will allow a liable person time to adjust to making financial support payments.

Compulsory deductions for newly liable parents

A newly liable person will pay their financial support obligations by automatic deduction from source deduction payments made by their employer. That will be regardless of whether or not they have defaulted on their obligations. The amendment will encourage compliance by helping newly liable parents get their payments right from the start.

Introduction of time bar for reassessments of child support

There will be time limits placed on reassessing child support years by introducing a rule that would restrict reassessments of a child support year to a 4-year period from the end of the relevant child support year. That proposal will reduce uncertainty for parents.

Definition of income used for child support

The definition of income used for child support is amended to better reflect a parent’s financial capacity by incorporating investment income and no longer offsetting losses from earlier years.

Departmental disclosure statement

The Inland Revenue Department is required to prepare a disclosure statement to assist with the scrutiny of this Bill. The disclosure statement provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill.

Regulatory impact assessment

The Inland Revenue Department produced a regulatory impact assessment on 8 August 2019 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.

Part by Part analysis

The main amendments proposed in this Bill include the following:

Amendments to Part 1 of Act (liability to pay child support under formula assessment)

Clause 5 makes 2 changes to the description of the children who qualify for child support. Currently, section 5 of the Act provides that the qualifications include that—

  • the person is not financially independent. The Bill proposes that this qualification will apply only to persons aged 16 or over:

  • the person is under the age of 18, or is aged 18 and enrolled at and attending a school. The Bill proposes that a person aged 18 who is enrolled at and attending a school ceases to qualify for child support on 31 December in the year in which they turn 18, regardless of whether they are still enrolled at and attending a school after that date.

Clause 6 makes a change to when liability to pay child support starts if the Commissioner of Inland Revenue receives an application for a formula assessment that names a person as a parent of a qualifying child, but the person is not at that time a parent of the child (for example, because paternity has not been established). The intention is—

  • to introduce 60-day time limits for applying for a court order of parentage and providing the order to the Commissioner. If those time limits are met, liability to pay child support is backdated to when the Commissioner received the application for child support:

  • if those time limits are not met, child support would be established from the date the order of parentage is provided to Inland Revenue. However, Inland Revenue is given discretion to accept court orders outside the time limits if the delay was due to circumstances outside the person’s control.

Clause 7 provides expressly that a liable parent ceases to be liable to pay child support under a formula assessment when a child leaves State care. Currently, section 25(3) of the Act provides that, when a child leaves State care, the liable parent ceases to be liable to pay child support only in respect of a particular receiving carer.

Amendments to Part 2 of Act (amount of child support payable under formula assessment made by Commissioner)

Clauses 8 to 17 relate to the formula for assessing annual amounts of child support. The formula uses both parents’ income but first deducts a living allowance, a dependent child allowance for children in a parent’s care, and a multi-group allowance if a parent is paying or receiving child support for children in other relationships. It also takes into account the care each parent provides for the children and the costs of raising them.

Clause 8 amends the costs used in the formula, which are worked out using the expenditure on children table in Schedule 3. This table has 3 different levels of costs depending on the age group: namely, age group 1, all children aged 0 to 12; age group 2, all, or the oldest 3, children aged 13 or over; age group 3, at least 1 child aged 0 to 12, and 1 or 2 children aged 13 or over. Clause 49 repeals the part of the table that relates to the third age group.

The intention is that expenditure calculations should be completed using a child’s appropriate age bracket, to address inappropriate expenditure allocations between older and younger children, and that the Commissioner of Inland Revenue should have the discretion to adjust child expenditure calculations in situations when complex care arrangements for children in the same calculation are not adequately accounted for by the usual method.

Clause 9 changes the type of income used as the starting point to calculate child support under a formula assessment. Currently, section 34 provides that a parent’s child support income amount is the person’s adjusted taxable income (determined under section 35) minus the various allowances. The Bill proposes to move from taxable income to net income (as defined in the Income Tax Act 2007). That means losses from earlier years will no longer be deducted. Corresponding changes are made to various other sections in the Act via Schedule 1 of the Bill.

Clause 10 amends the adjustment to income that is used in the child support formula. Currently, section 35(1)(a) provides that if, in the most recent tax year, the person’s income was derived solely from withholding income (ie, salary, wages, a benefit, or New Zealand interest and dividends), the person’s income is adjusted by using only income from employment for the calendar year immediately preceding the start of the child support year. The intention is to widen the definition of income used for child support purposes to include investment income such as dividends and interest.

The adjustment for other people will remain substantially the same. Currently, section 35(1)(b) provides that their adjusted income for child support purposes will be their income from 2 tax years ago adjusted by an inflation factor. For example, for the year April 2019 to March 2020, the person’s child support income assessment would be based on their income tax return filed for the year April 2017 to March 2018 adjusted by an inflation factor. This group of people are those who derived any of their income in the previous calendar year from overseas or from sources other than withholding income (for example, rents, self-employment, or overseas income, including interest and dividends).

Clause 11 makes 2 changes in respect of a parent’s living allowance. First, section 35A(1)(a) is amended to clarify that the rate at which to gross up the appropriate benefit rate for the coming child support year is the rate in force on 1 January of the preceding year. Secondly, section 35A(2)(b) is amended to put the law back to where it was before consequential changes made by the Social Security Act 2018, namely that the higher rate of living allowance is limited to a single beneficiary with at least 1 dependent child who is granted a supported living payment.

Clause 12 makes a change to section 35B that corresponds to the change described in clause 8.

Clauses 14 to 17 relate to estimation of income. If a person believes their income will be lower than the amount on which they have been assessed, they may be able to estimate their income for child support. Both liable parents and receiving carers can estimate their income for the whole child support year or at any time during the year.

The intention is to make the following amendments:

  • when a person joins the child support scheme, an estimation can be backdated to the start of the assessment if received on or before the 28th day after notification of the assessment:

  • the end-of-year reconciliation rules for estimates are updated to reflect the income earned over the reconciliation period.

Amendments to Part 5 of Act (assessment of child support and domestic maintenance)

Clause 18 provides that, when an initial child support assessment is made on the basis of certain facts about living circumstances that did not exist, a parent has a 28-day time limit for advising the Commissioner, if an amendment to the assessment is to be backdated (new section 81A). If they do not meet that 28-day time limit, amendments can be effective only from the date of notification.

Clause 20 proposes a 4-year time bar, preventing reassessments for past periods (new section 87A). The 4-year time bar would start from the end of the relevant child support year.

Example

For the child support year 1 April 2019 to 31 March 2020, reassessments could still occur until 31 March 2024. From 1 April 2024, reassessments for the year could no longer occur unless an exception applies.

However, the time bar will not apply if certain exceptions apply, for example,—

  • information provided by a person in the child support assessment is fraudulent or wilfully misleading or a return omits income of a particular nature:

  • a person who is part of the child support assessment dies:

  • a person should never have been made liable, for example, if a person is subsequently found not to be the parent of a child:

  • an amendment is required for the purposes of avoiding double liability (for the same child) with an overseas jurisdiction:

  • a court order is received that applies to an earlier period.

Amendments to Part 5A of Act (exemptions)

Currently, Part 5A provides for exemptions from the payment of financial support in the following cases:

  • if certain income criteria are met, for hospital patients in respect of periods of long-term hospitalisation, for prisoners in respect of periods of long-term imprisonment, and for liable parents under the age of 16 years:

  • for victims of sex offences, regardless of income.

The main changes proposed are—

  • to extend the current hospital and prisoner exemptions, to allow them to be granted to liable persons overseas in equivalent circumstances:

  • to introduce a new exemption for people suffering from long-term illness or injury who are not in a hospital or residential care facility and who meet certain income criteria.

Amendments to Part 6A of Act (departure from formula assessment of child support initiated by liable parent or receiving carer)

Clause 34 introduces a 4-month time limit within which to apply to the Commissioner of Inland Revenue for a review of a time-barred period (see also clause 20).

Amendments to Part 7 of Act (jurisdiction of courts in relation to child support and domestic maintenance)

Clause 36 removes 1 of the grounds for a departure order in section 105(2) of the Act, namely that it would be just and equitable to offset one liability against another, if 2 persons are each liable to pay in respect of the other an amount of child support under a formula assessment (whether or not those amounts have become due and payable). Offsetting of liabilities situations are instead to be dealt with by Inland Revenue (see clause 46).

Clause 39 repeals section 116, which provides for urgent maintenance orders.

Amendments to Part 8 of Act (collection of financial support)

Clause 41 provides that persons must pay financial support by automatic deduction if liability starts on or after 1 April 2021. The intention is that—

  • compulsory deductions apply to child support and domestic maintenance obligations:

  • financial support be compulsorily deducted from source deduction payments made by an employer for all domestic liable persons:

  • Inland Revenue has discretion not to apply the compulsory deduction provision in limited circumstances, for example, because of privacy concerns or when there are multiple employers:

  • compulsory deductions will not be applied automatically if the person is a liable person who is already paying financial support under the Act, for example, in respect of another child, by another payment method acceptable to the Commissioner and the person is compliant with their obligations.

Clauses 42 and 43 relate to penalties. The intention is—

  • to move back the imposition of the second phase of the initial penalty to 28 days after the initial due date (from 7 days after the initial due date):

  • to repeal the rule that provides that the minimum penalty imposed is $5:

  • to introduce a grace period for certain liable people, during which no penalties would be charged if payments are late. This would apply to the first due date and then for any due dates that occur within the following 60 days.

Amendments to Part 9 of Act (payment of financial support)

Clause 46 enables Inland Revenue to offset child support payments if 2 persons are each liable to pay in respect of the other an amount of child support under a formula assessment, whether or not that amount has become due and payable.

Amendment to Part 14 of Act (general provisions)

Clause 47 amends section 218, the definition of ordinarily resident in New Zealand for child support purposes, to enable a person’s intended movements to be taken into account.

Amendments to schedules

Clause 48 provides for transitional and savings provisions.

Clause 49 repeals the part of the expenditure on children table in Schedule 3 that sets out percentages of child support income amounts that are expended on children of different ages (see also clauses 8 and 12).

Hon Stuart Nash

Child Support Amendment Bill

Government Bill

228—1

Contents

Explanatory note
1Title
2Commencement
3Principal Act
4Section 2 amended (Interpretation)
5Section 5 amended (Children who qualify for child support)
6Section 19 amended (When liability to pay child support starts)
7Section 25 amended (When liability to pay child support ceases)
8Section 30 amended (Formula for assessing annual amount of child support)
9Section 34 amended (Child support income amount)
10Section 35 replaced (Adjusted taxable income)
35Adjusted income
11Section 35A amended (Living allowance)
12Section 35B amended (Dependent child allowance)
13Section 38 amended (Application of assessments under Income Tax Act 1976 or Tax Administration Act 1994)
14Section 40AA amended (Interpretation for purposes of sections 40 to 45)
15Section 40 amended (Estimated taxable income)
16Section 44 amended (End-of-year reconciliation)
17Section 44A amended (Determining income amount if no tax return filed)
18New section 81A inserted (Amendments of assessments arising from living circumstances existing at time initial assessment made)
81AAmendments of assessments arising from living circumstances existing at time initial assessment made
19Section 87 amended (Amendment of assessments)
20New section 87A inserted (4-year time bar for amendment of certain assessments)
87A4-year time bar for amendment of certain assessments
21Section 88 amended (Notice of assessment of formula assessment of child support)
22Section 89A amended (Outline)
23Section 89B amended (Definitions for this Part)
24Subpart 2 heading in Part 5A amended
25Cross-heading above section 89C amended
26Section 89C amended (Exemption for long-term hospital patients)
27New section 89CA inserted (Exemption for persons suffering from long-term periods of illness)
89CAExemption for persons suffering from long-term periods of illness
28Section 89D amended (Exemption for long-term prisoners)
29Section 89F amended (Exemption does not apply at any time during child support year if income criteria not met at any time during relevant period)
30Section 89G amended (Other restrictions on application of exemptions)
31Section 89H amended (Applications for exemptions under this subpart)
32Subpart 3 heading in Part 5A amended
33Section 89Z amended (Grant of exemption to victim of sex offence)
34New section 96BA inserted (Four-month time limit for certain applications that are time-barred under section 87A)
96BAFour-month time limit for certain applications that are time-barred under section 87A
35Section 96D amended (Determinations that may be made)
36Section 105 amended (Matters as to which court must be satisfied before making order)
37Section 106B repealed (Further provision on orders for offsetting of liabilities situations)
38Cross-heading above section 116 amended
39Section 116 repealed (Urgent maintenance orders)
40Section 129 amended (Right to choose voluntary automatic deductions or other payment method)
41New section 129A inserted (Persons to pay financial support by automatic deduction if liability starts on or after 1 April 2021)
129APersons to pay financial support by automatic deduction if liability starts on or after 1 April 2021
42Section 134 amended (Penalties for late payment of financial support debts)
43New section 134AAA inserted (Sixty-day grace period before penalties apply)
134AAASixty-day grace period before penalties apply
44Section 135JA amended (Relief from incremental penalties unpaid before deduction plan made on or after 1 April 2016)
45Section 137 amended (Order in which payments to be applied by Commissioner)
46Section 152B amended (Offsetting child support payments)
47Section 218 amended (Meaning of ordinarily resident in New Zealand)
48Schedule 1 amended
49Schedule 3 amended

The Parliament of New Zealand enacts as follows:

1 Title

This Act is the Child Support Amendment Act 2020.

2 Commencement

This Act comes into force on 1 April 2021.

3 Principal Act

This Act amends the Child Support Act 1991 (the principal Act).

Part 1 Amendments to sections of principal Act

4 Section 2 amended (Interpretation)

(1)

In section 2(1), insert in its appropriate alphabetical order:

income has the same meaning as net income has in section YA 1 of the Income Tax Act 2007

(2)

In section 2(1), definition of social security benefit, after paragraph (d), insert:

and social security beneficiary means a person who is in receipt of one of those benefits

(3)

In section 2(1), repeal the definition of taxable income.

Amendments to Part 1 (liability to pay child support under formula assessment)

5 Section 5 amended (Children who qualify for child support)

(1)

In section 5(1)(c), before “is not”, insert “in the case of a person aged 16 or older,”.

(2)

Replace section 5(4) with:

(4)

However, the latest that a child qualifies for child support is 31 December in the year in which they turn 18, regardless of whether they are still enrolled at and attending a school after that date.

6 Section 19 amended (When liability to pay child support starts)

Replace section 19(3) with:

(3)

Subsection (4) applies if the Commissioner receives an application for a formula assessment that names a person as a parent of a qualifying child (person P), but person P is not at that time a parent of the child within the meaning of section 7, if all of the following conditions are met:

(a)

a New Zealand court, or a court or public authority of any overseas jurisdiction, later finds person P to be a parent of the child:

(b)

the Commissioner determines under this Part that person P is a liable parent of the child:

(c)

the application is otherwise properly completed.

(4)

Liability by person P to pay child support under a formula assessment in respect of the child starts—

(a)

on the day on which the application is received by the Commissioner if—

(i)

the application for the finding referred to in subsection (3)(a) (the order) is made no later than 60 days after the Commissioner receives the application for a formula assessment; and

(ii)

the Commissioner receives the order no later than 60 days after the order is made; or

(b)

on the day on which the application is received by the Commissioner, if the Commissioner is satisfied that the time limits in paragraph (a) were not met because of reasons outside the applicant’s control; or

(c)

on the day on which the Commissioner receives the order, in any other case.

(5)

Subsection (6) applies if the Commissioner receives an application for a formula assessment that names a person as a parent of a qualifying child (person P), but person P is not at that time a parent of the child within the meaning of section 7, if all of the following conditions are met:

(a)

person P later, in any proceeding before any court in New Zealand, or before any court or public authority in an overseas jurisdiction, acknowledges that they are a parent of the child and a court has not made a finding of paternity of the child that is to the contrary of that acknowledgment:

(b)

the Commissioner determines under this Part that person P is a liable parent of the child:

(c)

the application is otherwise properly completed.

(6)

Liability by person P to pay child support under a formula assessment in respect of the child starts—

(a)

on the day on which the application is received by the Commissioner if—

(i)

the acknowledgment is made no later than 60 days after the Commissioner receives the application for a formula assessment; and

(ii)

the Commissioner receives the acknowledgment no later than 60 days after it is made; or

(b)

on the day on which the application is received by the Commissioner, if the Commissioner is satisfied that the time limits in paragraph (a) were not met because of reasons outside the applicant’s control; or

(c)

on the day on which the Commissioner receives the acknowledgment, in any other case.

7 Section 25 amended (When liability to pay child support ceases)

(1)

After section 25(1)(c), insert:

(d)

in any case to which section 8(2) applied, ceases to be a child in respect of whom payments are required to be made under section 363 of the Oranga Tamariki Act 1989.

(2)

Repeal section 25(3)(d).

Amendments to Part 2 (amount of child support payable under formula assessment made by Commissioner)

8 Section 30 amended (Formula for assessing annual amount of child support)

After section 30(2), insert:

(3)

However, if no child expenditure table applies, e is the amount, determined in accordance with the child expenditure table that would apply to the parent in respect of the child if all of the children in the child support group were the same age as the qualifying child, on the basis of—

(a)

the combined child support income amounts of both parents of the child; and

(b)

the number of children in the child’s child support group.

(4)

However, the Commissioner may make modifications to the child expenditure amount for the child that the Commissioner considers necessary or desirable if the Commissioner believes on reasonable grounds that—

(a)

there are exceptional circumstances (for example, exceptional complexity of care arrangements for children within a particular child support group); and

(b)

applying the provisions of this section without modification would result in an unjust or inequitable outcome (for example, an apportionment of costs that is disproportionate to the amount of expenditure attributable to the child).

9 Section 34 amended (Child support income amount)

(1)

In section 34(1) and (3), replace “taxable income” with “income” in each place.

(2)

In each provision listed in Schedule 1, replace “taxable income” with “income” in each place.

10 Section 35 replaced (Adjusted taxable income)

Replace section 35 with:

35 Adjusted income

(1)

A person’s adjusted income for a child support year is,—

(a)

if, in the most recent tax year, the person’s income was derived solely from withholding income, the person’s withholding income for the calendar year immediately preceding the start of the child support year; or

(b)

if paragraph (a) does not apply, the person’s income derived in the tax year immediately preceding the most recent tax year, inflated by the inflation percentage for the child support year.

(2)

If a person’s income for a tax year has not been assessed, the Commissioner must determine the person’s income on the basis of the income and any other particulars known to the Commissioner.

(3)

This section is subject to—

(a)

sections 38 to 39A (which relate to ascertaining income, etc); and

(b)

sections 40AA to 44A (which permit elections for adjusted income to be assessed using estimated income).

11 Section 35A amended (Living allowance)

(1)

In section 35A(1)(a), after “determined”, insert “as at 1 January in the immediately preceding child support year,”.

(2)

In section 35A(2)(b), after “for a person granted a supported living payment under subpart 4 of Part 2 of the Social Security Act 2018”, insert “who is, for the purposes of that benefit, a single beneficiary with 1 or more dependent children”.

12 Section 35B amended (Dependent child allowance)

After section 35B(2), insert:

(2A)

However, if no child expenditure table applies, e is the amount, determined in accordance with the child expenditure table that would apply to the parent in respect of the dependent child if all of the parent’s dependent children were the same age as the dependent child, on the basis of—

(a)

the child support income amount of the parent alone, with that amount being treated as the adjusted income of the parent, minus the parent’s living allowance; and

(b)

the total number of the parent’s dependent children.

(2B)

However, the Commissioner may make modifications to the child expenditure amount for the child that the Commissioner considers necessary or desirable if the Commissioner believes on reasonable grounds that—

(a)

there are exceptional circumstances (for example, exceptional complexity of care arrangements for the parent’s dependent children); and

(b)

applying the provisions of this section without modification would result in an unjust or inequitable outcome (for example, an apportionment of costs that is disproportionate to the amount of expenditure attributable to the dependent child).

13 Section 38 amended (Application of assessments under Income Tax Act 1976 or Tax Administration Act 1994)

(1)

In section 38(1), replace “the Income Tax Act 1976 (other than an assessment made under section 21 of that Act” with “an income tax Act (other than an assessment made where there has been default in furnishing returns)”.

(2)

In section 38(2), (3)(a), (4), (5), and (6)(a), replace “the Income Tax Act 1976” with “an income tax Act” in each place.

(3)

After section 38(7), insert:

(8)

In this section, unless the context otherwise requires,—

assessment made where there has been default in furnishing returns means an assessment made if any person makes default furnishing a return, including by—

(a)

providing information in a return or an account that is not likely to be correct; or

(b)

providing a return that the Commissioner is not otherwise satisfied with; or

(c)

not making a return where the Commissioner has reason to suppose that the person is a taxpayer

income tax Act means all or any of the Income Tax Act 1976, the Income Tax Act 1994, the Income Tax Act 2004, and the Income Tax Act 2007.

14 Section 40AA amended (Interpretation for purposes of sections 40 to 45)

(1)

In section 40AA, definition of election period, after paragraph (b), insert:

(c)

if notice of the election is given after the end of the child support year under section 40(8), the period in the child support year in which the notice is given that starts on the first day of the month in which the notice is given and ends on the last day of that child support year

(2)

In section 40AA, insert in its appropriate alphabetical order:

reconciliation period has the meaning given in section 44(3D)

(3)

In section 40AA, definition of year-to-date income, after “notice of an election is given”, insert “except that, if the election is made under section 40(8) after the child support year has ended, the income only includes income until the end of that child support year”.

15 Section 40 amended (Estimated taxable income)

(1)

In section 40(1), delete “relating to that child support year”.

(2)

After section 40(3)(b), insert:

(c)

if notice of the election is given after the child support year to which it relates, state—

(i)

the person’s year-to-date income; and

(ii)

the person’s estimated taxable income for the election period.

(3)

After section 40(6), insert:

(7)

Subsection (8) applies to any person who receives an assessment unless they already have an existing assessment.

(8)

The person may make an election after the end of a child support year to which the election relates, provided the election is received by the Commissioner on or before the 28th day after notification of the assessment.

(9)

If an election is made after the end of a child support year under subsection (8), this section applies as if separate elections were made for each child support year to which the assessment relates.

16 Section 44 amended (End-of-year reconciliation)

Replace section 44(1) to (3) with:

(1)

For the purpose of determining whether a person has, or has been, underpaid or overpaid child support in a reconciliation period (period A), after the end of the child support year to which an election relates, the Commissioner must complete an assessment for the person who made the election (person A), treating the amount determined under subsection (2) or (3B) as person A’s adjusted income.

(1A)

Subsections (2) and (3) apply if period A is the only election period, or the last election period, in the child support year.

(2)

The amount to be treated as person A’s adjusted income for the purposes of the assessment is,—

(a)

if the actual income earned by person A during the year is equal to or less than the year-to-date income specified in the notice of election, nil; or

(b)

if the actual income earned by person A during the year is more than the year-to-date income specified in the notice of election, the lesser of the following:

(i)

person A’s actual income earned in period A (which is the actual income earned in the full year less the year-to-date income specified in the notice of election), annualised in accordance with the formula in subsection (3) (which gives the annualised actual income in the reconciliation period):

(ii)

person A’s original adjusted income.

(3)

The formula for annualising person A’s actual income in a reconciliation period is—

(a ÷ b) × 365

where—

a

is the actual income earned during the reconciliation period

b

is the number of days in the reconciliation period.

(3A)

Subsections (3B) and (3C) apply if period A is a period that is not referred to in subsection (1A).

(3B)

The amount to be treated as person A’s adjusted income for the purposes of the assessment is,—

(a)

if the actual income earned by person A during the year is equal to or less than the year-to-date income specified in the notice of election, nil; or

(b)

if the actual income earned by person A during the year is more than the year-to-date income specified in the notice of election, the lesser of the following:

(i)

person A’s actual income earned in period A, annualised in accordance with the formula in subsection (3C) (which gives the annualised actual income in the reconciliation period):

(ii)

person A’s original adjusted income.

(3C)

The formula for annualising person A’s actual income in a reconciliation period is—

((a − z) ÷ b) × 365

where—

a

is the year-to-date income specified in the estimate for the period that immediately succeeds period A

z

is the year-to-date income specified in the estimate for the period A

b

is the number of days in the reconciliation period.

(3D)

In this section, unless the context otherwise requires,—

reconciliation period, in relation to an election, means a period that—

(a)

starts on,—

(i)

if the notice of the election is given before the start of the child support year, the start of the child support year:

(ii)

otherwise, the first day of the month in which the notice is given; and

(b)

ends with the close of—

(i)

the last day of the month before any other immediately subsequent election period starts in relation to another election; or

(ii)

the last day of the child support year.

17 Section 44A amended (Determining income amount if no tax return filed)

Replace section 44A(2) with:

(2)

Where this section applies, the Commissioner must determine that the amount to be treated as the person’s adjusted income for the purpose of the assessment under section 44(2) or (3B) is the same as the person’s original adjusted income, unless the Commissioner is satisfied that there is reasonable cause for the failure to provide the return of income.

Amendments to Part 5 (assessment of child support and domestic maintenance)

18 New section 81A inserted (Amendments of assessments arising from living circumstances existing at time initial assessment made)

After section 81, insert:

81A Amendments of assessments arising from living circumstances existing at time initial assessment made

(1)

This section applies if—

(a)

the Commissioner made an assessment on the basis that certain living circumstances existed at the time of assessment; and

(b)

the recipient of the assessment advises the Commissioner that the circumstances did not exist at the time of assessment; and

(c)

section 82 does not apply.

(2)

The Commissioner may backdate any amendment made under section 87 to the time when the assessment was made if the recipient of the assessment advises the Commissioner within the period of 28 days beginning with the date of the notice of assessment.

(3)

Otherwise, an amendment of the assessment under section 87 is effective only from the date on which the recipient advises the Commissioner.

19 Section 87 amended (Amendment of assessments)

After section 87(6), insert:

(7)

This section is subject to section 87A.

20 New section 87A inserted (4-year time bar for amendment of certain assessments)

After section 87, insert:

87A 4-year time bar for amendment of certain assessments

(1)

Despite section 87, the Commissioner may amend an assessment only—

(a)

before the expiry of the fourth child support year after the end of the child support year in which the assessment was given; or

(b)

as a result of information or an application that was received by the Commissioner before the expiry of that fourth child support year; or

(c)

if an exception in subsection (2) or (3) applies.

(2)

An exception applies if the Commissioner is of the opinion that—

(a)

information provided by a person is fraudulent or wilfully misleading; or

(b)

information provided by a person does not mention income that is of a particular nature, or that was derived from a particular source, and in respect of which information is required to be provided; or

(c)

an assessment is made under subpart 4 of Part 5A (which relates to victims of sex offences).

(3)

An exception also applies if—

(a)

a liable person, child, or payee to whom the assessment relates has died; or

(b)

a person is not a parent of the child; or

(c)

reassessment is necessary to avoid double liability of a liable person who has paid financial support in an overseas jurisdiction in respect of the same child or payee and period; or

(d)

a court order is received that applies to an earlier period; or

(e)

a new assessment is made in relation to a qualifying child (for example, because a paternity order is provided) and it results in a reassessment of an existing child support assessment in relation to another qualifying child or children; or

(f)

the Commissioner did not meet the requirements of section 89 (which relates to notification).

(4)

This section does not otherwise restrict rights in respect of review, objection, or appeal under other Parts of this Act.

Compare: 1994 No 166 s 108

21 Section 88 amended (Notice of assessment of formula assessment of child support)

After section 88(3), insert:

(3A)

Any notice of assessment to which section 81A(2) could apply must specifically draw the attention of the recipient to the 28-day time limit for advising the Commissioner of any living circumstances that existed at the time when the assessment was made but that appear not to have been taken into account by the Commissioner.

Amendments to Part 5A (exemptions)

22 Section 89A amended (Outline)

After section 89A(1)(a), insert:

(aa)

for persons suffering from long-term periods of illness, if certain income criteria are met:

23 Section 89B amended (Definitions for this Part)

(1)

In section 89B, definition of hospital patient, replace paragraph (b) with:

(b)

a resident in a treatment centre within the meaning of the Substance Addiction (Compulsory Assessment and Treatment) Act 2017; or

(c)

a person in an overseas jurisdiction who is equivalent to a patient referred to in paragraph (a) or to a resident referred to in paragraph (b)

(2)

In section 89B, insert in its appropriate alphabetical order:

period of illness means the continuous period during which a person is suffering from an illness or injury

(3)

In section 89B, definition of prisoner, after paragraph (b), insert:

(c)

in legal custody in an overseas jurisdiction that is equivalent to legal custody referred to in paragraph (a) or (b)

24 Subpart 2 heading in Part 5A amended

In Part 5A, in the subpart 2 heading, after “hospital patients,”, insert “persons suffering from long-term periods of illness,”.

25 Cross-heading above section 89C amended

In the cross-heading above section 89C, after hospital patients, insert and persons suffering from long-term periods of illness.

26 Section 89C amended (Exemption for long-term hospital patients)

In section 89C(1)(a)(ii), after “hospital patients”, insert “or an equivalent benefit in an overseas jurisdiction”.

27 New section 89CA inserted (Exemption for persons suffering from long-term periods of illness)

After section 89C, insert:

89CA Exemption for persons suffering from long-term periods of illness

(1)

A liable person is eligible for an exemption from the payment of financial support for the whole, or a part, of a long-term period of illness of that person if—

(a)

the person’s income for that whole period, or that part, will be, or was, nil or will be, or was, calculated only from income consisting solely of income from investments; and

(b)

the person’s income from investments (if any) during that whole period, or that part, did not, or will not,—

(i)

exceed an average amount per week in that whole period, or that part, that is equal to the relevant minimum annual rate of financial support, divided by 52; and

(ii)

if that whole period, or that part, is 1 or more full child support years in duration, exceed, in a child support year in that whole period, or that part, the relevant minimum annual rate of financial support; and

(c)

the long-term period of illness results in the person being unable to engage in paid work; and

(d)

the person applies for the exemption in accordance with section 89H.

(2)

For the purposes of subsection (1)(a), a liable person’s income during a long-term period of illness does not include any amounts received by the person during that period for, or in respect of, any time up to and including the day on which the long-term period of illness began.

(3)

This section is subject to sections 89F and 89G.

28 Section 89D amended (Exemption for long-term prisoners)

In section 89D(1)(a)(ii), after “Corrections Act 2004”, insert “or equivalent employment in an overseas jurisdiction”.

29 Section 89F amended (Exemption does not apply at any time during child support year if income criteria not met at any time during relevant period)

(1)

In section 89F(1)(a)(i), after “Social Security Act 2018”, insert “or an equivalent benefit in an overseas jurisdiction”.

(2)

After section 89F(1)(a)(i), insert:

(ia)

in the case of an exemption under section 89CA, the person receives any income (subject to section 89CA(2)) other than from investments; or

(3)

Replace section 89F(1)(a)(ii) with:

(ii)

in the case of an exemption under section 89D or 89E, the person receives any income (subject to section 89D(1A)) other than from investments or from employment under section 66 of the Corrections Act 2004 or equivalent employment in an overseas jurisdiction; or

(4)

After section 89F(2), insert:

(2A)

Also, in the case of an exemption under section 89CA, if a liable person is receiving a benefit at the start of that person’s period of illness, that benefit does not prevent the exemption from applying after the person stops receiving that benefit for the whole, or a part of, the rest of the child support year in which that exemption applies.

(5)

In section 89F(3), definition of relevant period, after paragraph (a), insert:

(aa)

in the case of an exemption under section 89CA, means the period of illness that is in the child support year and during which the person would, but for an exemption under this subpart, be liable to pay financial support; and

30 Section 89G amended (Other restrictions on application of exemptions)

(1)

After section 89G(1)(a), insert:

(aa)

the day on which the relevant period of illness ends (in the case of an exemption under section 89CA):

(2)

After section 89G(3)(a), insert:

(aa)

section 89CA is made under section 89H after the day on which the relevant period of illness ends, the exemption does not apply at any time before the commencement of this paragraph:

31 Section 89H amended (Applications for exemptions under this subpart)

(1)

After section 89H(1)(b)(i), insert:

(ia)

the expiry of 3 months after the day on which the relevant period of illness ends (in the case of an application for an exemption under section 89CA); or

(2)

After section 89H(1)(c), insert:

(ca)

in the case of an application for an exemption under section 89CA, include evidence, as reasonably required by the Commissioner, to satisfy the Commissioner that the applicant has a long-term period of illness during the period to which the application relates; and

(3)

After section 89H(2)(a), insert:

(aa)

section 89CA may be made in relation to the whole of the long-term period of illness or 1 or more parts of that whole period:

32 Subpart 3 heading in Part 5A amended

In Part 5A, in the subpart 3 heading, after “hospital patients,”, insert “persons suffering from long-term periods of illness,”.

33 Section 89Z amended (Grant of exemption to victim of sex offence)

In section 89Z(4), replace “section 85K” with “section 18H”.

Amendments to Part 6A (departure from formula assessment of child support initiated by liable parent or receiving carer)

34 New section 96BA inserted (Four-month time limit for certain applications that are time-barred under section 87A)

After section 96B, insert:

96BA Four-month time limit for certain applications that are time-barred under section 87A

(1)

An application under section 96B that asks for a determination in relation to a time-barred period must be received by the Commissioner within 4 months after the date on which the latest notice of assessment in respect of that period is given by the Commissioner to the applicant.

(2)

In this section, a time-barred period means the period in section 87A after which the Commissioner may not amend an assessment unless an exception under that section applies.

35 Section 96D amended (Determinations that may be made)

Repeal section 96D(1)(bb).

Amendments to Part 7 (jurisdiction of courts in relation to child support and domestic maintenance)

36 Section 105 amended (Matters as to which court must be satisfied before making order)

Repeal section 105(2)(e) and the heading above section 105(2)(e).

37 Section 106B repealed (Further provision on orders for offsetting of liabilities situations)

Repeal section 106B.

38 Cross-heading above section 116 amended

In the cross-heading above section 116, replace Urgent maintenance orders and suspension with Suspension.

39 Section 116 repealed (Urgent maintenance orders)

Repeal section 116.

Amendments to Part 8 (collection of financial support)

40 Section 129 amended (Right to choose voluntary automatic deductions or other payment method)

In section 129(1), replace “sections 130 and 131” with “sections 129A to 131”.

41 New section 129A inserted (Persons to pay financial support by automatic deduction if liability starts on or after 1 April 2021)

After section 129, insert:

129A Persons to pay financial support by automatic deduction if liability starts on or after 1 April 2021

(1)

This section applies to a liable person who receives an assessment unless—

(a)

the person is already paying financial support under this Act (for example, in respect of another child) by another payment method acceptable to the Commissioner; and

(b)

the person is not in default of their obligations under this Act.

(2)

Section 129 does not apply and payments of financial support must be paid—

(a)

by way of automatic deduction under Part 10 from source deduction payments paid by an employer of the person; or

(b)

if the Commissioner considers automatic deduction inappropriate in the person’s case, by another payment method acceptable to the Commissioner.

42 Section 134 amended (Penalties for late payment of financial support debts)

(1)

Replace section 134(2) with:

(2)

At the expiry of the due date, the penalty is an amount equal to 2% of the amount of financial support remaining unpaid at the expiry of the due date.

(2)

In the heading above section 134(3), replace seventh with 27th.

(3)

In section 134(3), replace “seventh” with “27th”.

43 New section 134AAA inserted (Sixty-day grace period before penalties apply)

After section 134, insert:

134AAA Sixty-day grace period before penalties apply

(1)

This section applies to a liable person who receives an assessment unless—

(a)

the person is already a liable person under an existing assessment; or

(b)

the person was already identified by the Commissioner as a liable person in respect of a past period to which the assessment relates.

(2)

The person is not liable to pay to the Commissioner a penalty under section 134 in respect of a debt that becomes due and payable during a 60-day grace period.

(3)

The grace period starts,—

(a)

if the person is liable to pay financial support, on the first date on which a debt becomes due and payable under the assessment by the liable person in respect of a period starting on or after 1 April 2021:

(b)

if the person is subject to a nil assessment, on the date of the assessment.

(4)

The grace period ends with the expiry of 60 days after the grace period starts.

44 Section 135JA amended (Relief from incremental penalties unpaid before deduction plan made on or after 1 April 2016)

In section 135JA(1), definition of relevant payments, replace paragraph (b) with:

(b)

earnings-related compensation (as defined in clause 41(9) of Schedule 7 of the Tax Administration Act 1994); or

45 Section 137 amended (Order in which payments to be applied by Commissioner)

Repeal section 137(a).

Amendments to Part 9 (payment of financial support)

46 Section 152B amended (Offsetting child support payments)

(1)

Replace section 152B(1) with:

(1)

This section applies if 2 persons are each liable to pay in respect of the other an amount of child support under a formula assessment (whether or not those amounts have become due and payable).

(1A)

The Commissioner may at any time offset one amount against the other if the Commissioner is satisfied that it would be just and equitable to do so.

(2)

In section 152B(2), replace “liability of a parent” with “amount”.

Amendment to Part 14 (general provisions)

47 Section 218 amended (Meaning of ordinarily resident in New Zealand)

After section 218(5), insert:

(6)

The Commissioner may treat a child as ordinarily resident in New Zealand if the Commissioner is satisfied that the child is personally present in New Zealand and is likely to be ordinarily resident in New Zealand within the meaning of this section.

(7)

The Commissioner may treat a child as not ordinarily resident in New Zealand if the Commissioner is satisfied that the child is not personally present in New Zealand and is not likely to be ordinarily resident in New Zealand within the meaning of this section.

(8)

The Commissioner may treat a person other than a child as ordinarily resident in New Zealand if the Commissioner is satisfied that the person is personally present in New Zealand and intends to be ordinarily resident in New Zealand within the meaning of this section.

(9)

The Commissioner may treat a person other than a child as not ordinarily resident in New Zealand if the Commissioner is satisfied that the person is not personally present in New Zealand and does not intend to be ordinarily resident in New Zealand within the meaning of this section.

(10)

Subsections (6) to (9) apply despite subsections (2) to (4).

Part 2 Amendments to Schedules of principal Act

48 Schedule 1 amended

In Schedule 1,—

(a)

insert the Part 4 set out in Schedule 2 of this Act as the last part; and

(b)

make all necessary consequential amendments.

49 Schedule 3 amended

In Schedule 3, table, repeal the eighth and ninth columns and the headings above those columns.

Schedule 1 References to “taxable income” replaced with “income”

s 9(2)

Section 2(1), definitions of adjusted taxable income, income amount order, and last relevant tax year

Section 35B(2)

Section 36(4)

Cross-heading after section 36D

Section 38(1) to (4), (5)(b), and (6)(a)

Heading to section 39

Section 39(1) and (3)

Cross-heading above section 40AA

Section 40AA, definitions of annualised estimated taxable income, election, estimated taxable income, original adjusted taxable income, and year-to-date income

Heading to section 40

Section 40(1) to (4)

Section 41(1)

Section 42(2)

Section 43(1)

Section 44A(1)

Section 88A(1) and (2)

Section 105(2) and (3)

Section 106(1)

Section 106A

Schedule 2 New Part 4 inserted into Schedule 1

s 48

Part 4 Provisions relating to Child Support Amendment Act 2020

13 Interpretation in this Part

In this Part,—

2020 Amendment Act means the Child Support Amendment Act 2020

commencement means 1 April 2021

old, in relation to a provision, means the provision as if the amendments made to the provision by the 2020 Amendment Act had not been made

old Act means the Child Support Act 1991 as if the amendments made by the 2020 Amendment Act had not been made.

14 2020 Amendment Act does not apply to financial support for child support years ending before commencement

Except as provided in this Part, the old Act continues to apply in relation to financial support in respect of a child support year ending before commencement.

15 Amendments to section 5 (Children who qualify for child support)

(1)

The amendment to section 5(1) (financial independence qualification) made by section 5(1) of the 2020 Amendment Act applies only to a child who turns 16 on or after commencement.

(2)

The amendment to section 5(3) (age qualification) made by section 5(2) of the 2020 Amendment Act applies only to a child who turns 18 on or after commencement.

(3)

The old section 5(3) continues to apply if the child turned 18 before commencement.

(4)

The old section 5(4) continues to apply in relation to the child support year starting on 1 April 2015.

16 Amendment to section 19 (When liability to pay child support starts)

(1)

The amendment to section 19 made by section 6 of the 2020 Amendment Act applies only to applications for formula assessment of child support that are received by the Commissioner on or after commencement.

(2)

The old section 19 continues to apply if the application was made before commencement.

17 Insertion of section 81A (Amendments of assessments arising from living circumstances existing at time initial assessment made)

Section 81A (as inserted by section 18 of the 2020 Amendment Act) applies on or after commencement, including if the assessment was made before commencement.

18 Insertion of section 87A (4-year time bar for amendment of certain assessments)

Section 87A (as inserted by section 20 of the 2020 Amendment Act) applies in respect of all child support years, whether ending before commencement or on or after commencement.

19 Savings provision about orders for offsetting of liabilities situations

The repeal of sections 105(2)(e) and 106B by sections 36 and 37 of the 2020 Amendment Act does not affect—

(a)

any order made under section 106B before commencement, which continues in full force and effect; or

(b)

the power of the court in any proceedings that were commenced under section 104 before commencement but that were not completed, and the court may make an order under section 106 on the ground in section 105(2)(e) as if sections 105(2)(e) and 106B had not been repealed.

20 Amendments to section 134 (Penalties for late payment of financial support debts)

The amendments to section 134 made by section 42 of the 2020 Amendment Act apply to a financial support debt if the expiry of the seventh day after the due date falls on or after commencement, but do not apply to a financial support debt if the expiry of the seventh day after the due date falls before commencement.

21 Amendment to section 152B (Offsetting child support payments)

The amendment to section 152B made by section 46 of the 2020 Amendment Act applies to all child support years, regardless of the period in which the liability to pay financial support arose or when an amount of financial support became due and payable.