New IRD computer system means added costs in store

The $163 million cost of changing the child support rules will increase further when the Inland Revenue Department implements a completely new computer system in the next few years.

A regulatory impact statement issued with amending legislation last week says that beyond the $163 million cost of changing computer and administrative systems for child support over the next 10 years, "there will be an additional cost of migrating the reforms to the new 'transformed environment'".

The department expects to spend about $1.5 billion on a "multi-year business transformation" that will ultimately save costs by automating some tasks and integrating the many parts of the tax system.

US-based multinational Accenture started work in January on the first stage.

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The department said yesterday that it could not give an immediate answer on how the costs of the child support reform had blown out from a 2011 initial estimate of $30 million, first to $120 million approved by the Cabinet in 2012, and then to $210 million, before being scaled back to $163 million by last-minute amendments introduced in Parliament last week.

It said a Herald request for details would be answered within 20 working days under the Official Information Act.

The reform, due to take effect on April 1, will determine child support payments based on both parents' incomes and the time a child spends with each parent. Until now, payments have been based only on the non-custodial parent's income and did not take account of shared care unless both parents had the child for at least 40 per cent of the time.

On balance, the change will benefit paying parents - usually fathers - more than receiving parents, who are still most often mothers. Almost 46,000 paying parents will pay less than they do now, against only 32,691 who will pay more.

Conversely, 29,776 receiving parents will get less compared with 24,505 who will get more.

Although no figures are available, the implication is the net amount of child support paid for the 200,000 children involved will drop below the current $450 million a year.

About $210 million a year of the current payments simply goes to the government to offset the cost of sole-parent benefits. The regulatory impact statement says the government's revenue from the scheme will drop by only $115 million over 10 years, implying a drop in payments to the state of about $11.5 million a year, or 5.5 per cent.

The new system is meant to be fairer, reflecting the realities that most mothers are now in paid work and that shared care is common.

Child Poverty Action Group economist Dr Susan St John said it was "a national disgrace" that the reform achieved only "tiny improvements" for some parents at "such enormous administrative cost".