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Child support debt exceeds $2.6 billion

Published: 1:39PM Thursday February 28, 2013 Source: Fairfax

Child support debt has ballooned to more than $2.6 billion in New Zealand and shows no sign of abating, as Inland Revenue struggles to rein in those who are falling behind in payments.

IRD figures released under the Official Information Act show child support debt in this country had risen by more than 13% in a year.

The most recent data showed a total debt of $2.61 billion as of November 30, last year.

In 2011, figures showed almost eight out of ten of those liable for child support were behind in their payments, owing Inland Revenue almost $2.3 billion.

The IRD was unable to give an accurate breakdown of numbers of men compared with women paying child support because the data was not held.

But of the debt currently owing, $337 million was deemed "uncollectable" and more than $1.9 billion of the total debt had been incurred through penalties over late payments.

Flawed system

Northland father of three Matt Turner said the systems did not make it easy for parents who wanted to make sure their children were provided for.

Turner divorced from his wife in 2009 and has been paying child support since then. But when IRD conducted an administrative review, upon her request, Turner immediately found himself with more than $10,000 worth of debt.

"The system just seems incredibly flawed to me, in that there's no way to adjust it if you find yourself out of pocket because of incorrect information."

In 2012, more than 4200 administrative reviews were conducted over child support payments. Of those, a quarter resulted in a change to the amount of money a parent had to pay in child support.

Documents obtained show that when Turner took on a new position which involved a pay rise mid last year, he advised IRD of his new pay rate.

But because he was already up to date with payments to the end of that financial year, the IRD said he did not need to change anything, and was in fact in credit by more than $300.

"And with the stroke of a pen, it just seems they've completely ignored all the information they had on file and have charged me on what they think I have the potential to earn," Turner said.

Administrative review documents show although Turner's new income was $68,536 per year, his child support income was reset at $73,536.

"The income of $73,536 is arrived at by taking Mr Turner's income of $68,536 for 2013, extrapolated over the year... plus the financial benefit of $5000 that he derives from the use of a company car," the review decision said.

Turner said as of April, his payments would be adjusted again to reflect the correct amount of money he was being paid - reducing from $1372 per month, back down to $273 - but he would still be left with the debt.

"At the end of the day I love my children, and always want them to be provided for, so anything that needs to be paid, will be paid.

"But it just doesn't seem like the system is there to encourage parents to make those payments, rather, it applies a serious amount of pressure to the point of becoming incredibly difficult to get out of what can be crippling debt in some situations."

And it would appear the Auditor General agrees with that sentiment.

In a 2010 report, Lyn Provost said the current system was "inflexible" and did not support effective management of child support debt.

"I cannot help but observe that, rather than supporting compliance, the penalty regime is impeding the effectiveness of the child support scheme," she said.

"Child support schemes work best when parents pay voluntarily."

Turner was now discussing the possibility with his ex-wife of making voluntary payments outside the IRD, which legally could be done, but in many situations agreements could be hard to reach.

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