Child support is set to be overhauled in the biggest proposed changes to child support law in 20 years.
The income of both parents will be factored into child support calculations for the first time under the Child Support Amendment Bill proposed by Revenue Minister Peter Dunne which has its first reading in Parliament tomorrow.
At present, the income of the parent who has sole care of children is not considered in child support calculations because current laws assume the sole carer will not be earning an income.
"We will include the income of both partners in the equation in terms of liability. Since 1992 far more of the custodial parents are back in the work force," Mr Dunne said.
If passed, the bill would do away with a blanket approach to calculating how much child support a parent had to pay and would factor in individual circumstances.
Mr Dunne said the main carer of children, or the person who had custody, was now often an income earner and this had not been factored in to how payments had been calculated.
The new formula for calculating child support payments would include more recognition of shared care of children, the income of both parents and the estimated average expenditure for raising children in New Zealand.
Debt from unpaid child support sat at $2 billion and 60 per cent of the debt was from overdue penalty payments.
Mr Dunne said the system focused too heavily on penalties and people were not coming forward to IRD to make payments.
"What happens is people get behind in their payments and they incur interest and penalties and the figures get to be very huge and they drop out of the system because it becomes all too difficult," he said
Parents had been put off paying penalties on child support payments because high debt levels discouraged them from contacting the IRD.
Other changes proposed in the bill would see an amendment to the payment, penalties and the write-off of child support debt.
The proposed change would see more flexibility in situations of hardship and payments would could be made in instalments.
It would also stop child support when children turned 18 instead of the current 19, and factor in dual care arrangements.
The changes would bring New Zealand in line with Australian policy.
New Zealand had a mutual agreement with Australia for child support payment cases and the law would make it easier to deal with unpaid child support.
"We are updating the scheme to fit today's social realities," said Mr Dunne.
"What happens is people get behind in their payments and they incur interest and penalties and the figures get to be very huge and they drop out of the system because it becomes all too difficult," he said.
- APNZBy Kate Shuttleworth @K8Shuttleworth Email Kate