Thousands of solo parents on benefits must from today look for employment. Simon Collins reports on a sweeping welfare change.

A top Government adviser says child support payments should be paid directly to sole-parent beneficiaries, not kept by Inland Revenue to offset the costs of the benefits.

Carl Davidson, who was named the new head of the Families Commission in July, said the move would encourage more absent parents to pay, and reduce child poverty in sole-parent families.

But the idea, which would cost $185 million a year, was discussed and rejected in an Inland Revenue discussion paper on reforming child support this month.

Mr Davidson, 43, taught research methods to Social Development Minister Paula Bennett at Massey University's Albany campus in the 1990s.

In 2006, he co-founded the Christchurch company Research First, which is now the South Island's biggest market research business.

The Families Commission has published a series of reports on child support and said last year that "it may be time for New Zealand to consider whether child support payments should be passed on to the custodial parent in receipt of the domestic purposes benefit (DPB)".

"New Zealand is increasingly out of step with other countries in not allowing child support to be passed on to children whose custodial parents are on a carer's benefit," the commission said.

Australia pays child support directly to parents on benefits, but treats the child support as income and reduces the benefit accordingly.

Britain had a similar system to New Zealand's until 2008, but has introduced changes which mean the benefit system now totally ignores child maintenance.

"The introduction of the full maintenance disregard in April 2010, combined with existing child maintenance reforms, will help lift a further 100,000 children out of poverty," the Families Commission report said.

Inland Revenue collected $365 million in child support from 136,000 liable parents in 2008.

Last year 77,200 of the 137,821 custodial parents, accounting for $185 million of the money, were on the DPB.

Under current policy, Inland Revenue keeps all child support paid for those families except for 2000 families where the child support is more than the cost of the DPB and the custodial parent receives the difference.

Mr Davidson said the policy meant most liable parents whose ex-partners were on the DPB had no motivation to pay child support, and this was a major factor behind the growing child support debt of almost $2 billion.

"People don't comply when they don't think the system is fair. One way to make it more fair is where the paying parent pays the money directly to the receiving parent," he said.

"When I can see that my money is going to make a difference to my child, you are going to get better compliance."

He said sole parents on the DPB were also "some of the most economically marginalised people" with 50 per cent below the official poverty line last year.

"So having a direct payment from the paying parent would achieve a lot of useful outcomes," Mr Davidson said.

But Inland Revenue's discussion paper on proposed reforms to child support said paying parents on the DPB would create a "significant fiscal loss", higher administrative costs and more uncertainty for recipients, because their income would depend on how promptly the absent parents paid up.

ON THE WEB

ird.govt.nz/childsupport